Wheel Option Strategy: Selling Calls Before Expiration
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- Опубликовано: 10 июн 2024
- If you are trading "The Wheel Strategy", there's a big debate: Should you sell call options on Friday to get the additional money from the "weekend time decay"?
Sounds very tempting, but in this video, I will show you why selling calls before expiration can be a HUGE and very costly mistake, so check it out.
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Today's Video will cover:
Intro 0:00
What is the Wheel Strategy? 0:20
Let's look at an example 1:11
Choosing to NOT exercise 2:48
Why is it bad to sell naked calls? 3:50
How to avoid this costly mistake 5:55
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How to choose the right strike price: • What Is The Best Strik...
Learn how to trade The Wheel Strategy in 15 minutes or less:
• The Wheel Options Stra...
Recommended Links & Videos:
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• Wheel Strategy Tips - ...
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Trading with Margin: • Trading With Margin - ...
My Trading Routine: go.rockwelltrading.com/my-tra...
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Very insightful, thank you for sharing.
You are welcome! I am glad that this helps. ;)
Great explanation Markus. Thank you. 🙂
Awesome! Thank you for watching!
Like the new graphic editing, looks gooood
Thank you! I am glad that you like it! ;)
excellent.
I only use the Wheel Strategy using dividend stocks. When I own shares of the stock, I sell CC's with a strike price, 1 strike above my purchase price, unless the share price has already moved higher by Monday morning. If that happens, then I sell CC's, 1 strike above the current stock price. Either way, I am getting good premium AND stock price appreciation, if called away.
If the ex-div date is near, I may even roll the in the money CC, up one strike and out to a farther expiration that expires the following week, after the ex-div date, while still collecting a net credit for the roll.
I have learned a lot from Markus, and I like to look for ways to tweak my ROI.
Rolling out and up by 1 week rarely results in a net credit if you're in the money, especially during the week of ex-div date. The deeper ITM you are, the less likely for such a roll to work.
@@miguelrode First of all, the first cc you sell should not have the expiration date on the same week as the ex-div date. That solves some of the problem right there.
There are dividend stocks that only have monthly options that expire on the 3rd Friday of every month, and some of these stocks also have the ex-div date in the 3rd week. So if you want to sell cc's, you need to know how to handle it.
You are correct about needing a longer expiration to get a net credit.
Perhaps I didn't make it clear enough when I said "roll it out to a FARTHER expiration that expires the FOLLOWING WEEK, AFTER the ex-div date, (that would be two weeks out) while still collecting a net credit for the roll.
The point being, go out to a future expiration that DOES give you a small net credit.
Just don't get greedy and pick an expiration date, so far out, that it brings you a large net credit. It is better to pick as short an expiration as necessary, to get a small net credit.
Depending on how deep in the money the put is, I advocate only rolling a cc, up one strike at a time, but you will most likely have to go out two weeks to 2 months, to get a net credit.
A two or three paragraph post, giving a power point presentation, was not meant to have all inclusive scenarios.
If people are unsure, they can ask for clarification, just like you did.
Always happy to help.
You can buy back the put near expiration on Friday and buy the shares if you think your going get assigned then sell your covered call and get the weekend theta. Should only be a couple cents of extrinsic value left at 3pm.
Thank you for sharing your insights here. ;)
Hi Markus, Great video as always. I follow your youtube video for a long time. Is there any way to trade with you or your community in wheel trade ?
Hi Monjur, are you already a PowerX Optimizer owner? If not yet, avail of the current offer, you can purchase the software at $1997 instead of $2997 that is a $1000 discount. ;) Here is the promo link rockwell.infusionsoft.com/app/orderForms/PowerX-Optimizer?promo=cristyspecial
Wheel is a great strategy and it’s important to keep it simple…so I don’t like to sell calls before expiration or rolling them. Just a simple process to repeat after expiration…and the only scenario to sell puts before expiration is 80 or 90% in few days.
That's the plan 😊
When wby and how does a seller NOT collect full premium in covered calls or put sell?
Add the phrase (Naked before confirmed assignmenr) before expiration
Disagree here! You can have the same opposite outcome if stock drops over weekend! My plan when selling options, I don’t care as much about price movement but more about target premium and annualized gains for selling. The day of week does not come in to play! If it is within target/planned numbers that order goes!
Hi Markus Ramesh again,After selling a put, to avoid assigning and to hedge would you suggest to buy a put at a lower strike price. (To ensure a peaceful sleep.)
Thank you for the pointers! ;)
@@rockwelltradingservicesMarkus Thanks But you haven't answered my question, if I have to buy a lower strike put for hedging.
I might cover that in my next live session. I am taking note of this.
@@rockwelltradingservices Thanks mate...Looking forward to it
Awesome!
Why there are no more videos from you? Are you still selling options for income ?
Hi! Markus does a daily live show! Here is his livestream earlier ruclips.net/video/SR-B7-atZ74/видео.html
Hey Markus, we'd be happy to send you a prop challenge account if you would be kind enough to take a look at what we are doing at Traders With Edge. Would you like me to organise this for you?
Well, it seems that you wouldn't allow me to trade options, and 95% of my trades are option trades. Also, what would be the benefit for me to trade a "prop challenge account"?
@@rockwelltradingservices Sorry we thought you traded more even split. We don’t have to capability to allow options trading at this point in time, though it is something on our radar to add to our company.
I use the Powell strategy. Listen to Jerome Powell and trade accordingly.
Powell during Trump administration is different than Powell during Biden administration at the moment.
I’ll sell a put on Google tomorrow when it’s lower lol
Let me know how it goes! ;)