Wheel Options Strategy - When Should You Roll Options? | Episode 232
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- Опубликовано: 13 июл 2024
- Wheel Options Strategy - When Should You Roll Options? | Coffee With Markus | Episode 232
Intro: 0:00
What Is Rolling An Option?: 4:24
When Should You Roll An Option?: 6:05
What's The Best Strike Price For Rolling?: 17:09
How Does "Rolling" Work?: 19:20
What Are The Costs?: 20:33
Ask Me Anything: 22:34
When should you roll an option?
When trading the Wheel Strategy, you can choose to get assigned or have your shares called away, or you can roll an option.
In this video, we will talk about:
- When does it make sense to roll?
- What's the best strike price for rolling?
- How exactly does "rolling" work?
- What are the costs associated with rolling options?
... and much more
Recommended Links & Videos
The "Wheel" Strategy Explained: bit.ly/3ePN4qT 5:10
Options 101 Article: www.rockwelltrading.com/coffe...
My Trading Routine: go.rockwelltrading.com/my-tra...
#StockMarket #TradingOptions #OptionsTrading
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I hope you enjoyed Coffee With Markus live from NYC! If you found this video about rolling options, give this video a like. If you have any questions let me know in the comments.
Recommended Links & Videos
The "Wheel" Strategy Explained: bit.ly/3ePN4qT 5:10
Options 101 Article: www.rockwelltrading.com/coffee-with-markus/the-complete-beginner-guide-to-options-trading-options-101/
My Trading Routine: go.rockwelltrading.com/my-trading-routine
Were you able to claim the trip as a business expense because of the video shoot? Brilliant.
LOL - No, it doesn't work this way 😜
I can finally have a glimpse of how options works. You are the best teacher ever. I kind of have numbers dyslexia but I am getting it easier the way you explaining it matching it’s with real examples. Been trying for years to learn this and I found it so difficult. I was about to quit learning , Until I found you 2 days ago. Totally appreciate . Thanks Markus.
Awesome! I am glad that you are learning from me. I really appreciate your feedback.
Thank you for giving back! I understand your teaching style:)! God bless you.
Awesome! Thank you for watching! :)
Interesting.... YOU MAKE MORE MONEY GETTING ASSIGNED THAN ROLLING !!. I entered the same position with BAC, as Markus did, on February 28th selling weekly 41 PUTs initially for .20 and with the only difference that I rolled them instead; So far I am on my 2nd roll while Markus is on his second weekly covered CALLs. And after a simple calculation I found that Markus is making so far $165 per contract while I am only making $153 per contract, which is 7.8% more money...... NEXT TIME I WILL LET THE SHARES GET ASSIGNED!
The real advantage comes when the out of the money covered call expires in the money. In addition to earning option premium, you also earn stock appreciation. If you got assigned the stock at the $100 strike price, and you sell a covered call with a $105 strike price, you earn a 5% gain on the stock price rising, when the call expires in the money.
Such a good dad! The memories!!! Awesome intro, sir!!!
It's been a year since you made this video... I hope all is well with your daughter and y'all's plans came to fruition!
Everything is doing well! ;) Thank you for watching.
Thank you for such detailed explaiations.
😊 You are welcome! I am glad that this helps!
Good advice. I love the "Wheel."
Awesome! Thank you for watching! :)
Great video again Marcus! It remembers me last year I went with my son 'fresh MIT' to Manchester (UK) region to install for his brand new and first job. Great and very interesting topic too, thanks. Cheers. Robby
Thank you, Robby.
Welcome to New England. The snowflakes taste better in CT 😋
Hi Markus!
Thank you for all videos, it really helps!
I confused how to calculate profit if I roll out put options.
I sold put +$100
next week I roll it out and got +$30 credit - (that I see in trading station in order window).
So I made +$130.
Or
+$100 I sell 1 put contract for 1.00
-$120 I buy to close the put for 1.20
= - $20
+$150 I sell to open the put for 1.50
= $130
Is it correct?
Somebody count it different way:
sell to open a put for $100 +100 credit received
wait a week. P/L says $50 profit. -50 is the position value
roll the leg and receive a $30 credit +30 credit received.
In this case your total amount of premium received is $80
Please advise.
Thank you very much!!
Sorry for the question but I’m new to stocks and I saw a vid u made a while back it was extremely helpful but is this an example for options or just trading stocks I’m new to trading so I you could explain a little I would appreciate it this is for the vid you made 2 years ago called “Stock Market taking profits strategy” Thanks
Markus, I also hope you are looking at other areas for colleges.
Yes! We will go to Dartmouth next, and then we hit CA for Berkeley and a few others. 👍
I've been paper trading the wheel on DVN which has been on a tear this year. My short calls could be ITM by about 5 points tomorrow, maybe more (69 strike). Instead of rolling up and out what would be the downfall or drawback of just rolling out and continuing to do that in perpetuity instead of letting the stock get called or rolling for a loss?
Markus, another great video. Thank you. I hope you enjoy your time in NY and have fun checking out the colleges and universities. I have lived and still work there :) I wanted to ask what would you do when a put you sold hits and continues much lower than the strike price sooner than the expiration date. Do you wait to see how and if the price recovers? Do you buy to close when a certain% down move takes place? Do you do a roll as you described?
Thank you again and be safe!
Evan
Hi Evan, great question, and there are several ways how you can deal with that:
1.) You could just roll the put and avoid assignment
2.) You could set yourself a stop loss and if the stock moves below your stop loss, you exit the position with a loss
3.) You can use "dollar cost averaging" to lower your cost basis and wait for the stock to recover. That's what I call "flying rescue missions" - and I did a video on it:
ruclips.net/video/o70hJ53LzDQ/видео.html
Does this help?
Thank you for the explanation.
What are the reasons when I cannot roll vertical options on the last day of expiration?
You can roll options all the time, and it's actually best to roll it on the last day UNLESS they went deep in the money. Then you usually can't roll them and have to let your stocks get called away.
Another great video, Marcus! Still confused…why do you set the strike price for a call right above the selling price? Not afraid of the contracts getting called away? Thinking you just keep rolling it to prevent from being called away.
Great question. When selling the call at the strike price you got assigned, you're collecting the most premium, which decreases your breakeven point. That's why I like to stay close to the assigned price. Making sense?
@@rockwelltradingservices it does, thanks. And here I though you were just another pretty face in the Options space. When I saw the number of contracts you were writing at one time, I’ll admit, I pooped myself a little bit. Staggering numbers!
Hi Jake, LOL - Thanks for the feedback. And I started with a small $20,000 account and traded 1-2 options contracts. Like most traders, I started small. You got this! 👍
Hi Markus, so I see you roll the call once you get your 60% annualized premium. Is that a fix rule? Or do you decide individually if you role or if you let the call expire and sell a new call that fits later on?
For me, that's a rule, and I only roll calls when I can get 60% annualized. Does this help?
@@rockwelltradingservices Yes, and I think it makes sense to prefer 60% for a longer period of time over collecting the rest of the time value and hoping for the 60% after expiration
Yes, I agree! What are you using to filter through your stock picks at the moment?
hi Markus do we make the decision at expiry of a short put if we do not want to get assigned or we also need to do so if it gets deep ITM before expiry?
You can simply roll it out by 1-2 weeks using the same strike.
@@rockwelltradingservices thanks Markus ,that mean the same strike that I assume to be in the money because better premium collected and given that there is extrinsic value, it does not get assigned?
The problem is that you probably won't be able to "roll up" to a higher strike price without paying for it. So if you want to receive a credit for rolling, then you can only roll the expiration. If you are ok paying a debit for the roll, then you could "roll up and out". Making sense?
@@rockwelltradingservices thanks .yes I guess with expiry, some degree of decay would have set in to my advantage. I am thinking more of a situation where the stock plunges before expiry say by 30 percent . Example I sell a put at strike price of 100 that is out of the money
. And I assume the stock will gradually retrace to 70 at expiry and go sideways thereafter. So with the assumption that I do not want to get assigned , would it be better to 1) before expiry, to keep rolling from 100 to 70 and out(a later expiry date )at either breakeven /credit 2) wait till near expiry to do one roll to a lower strike and out( later expiry) in order to do so at a credit or break-even. My concern under scenario 2, if it gets too deep ITM, I may need to roll it out many months out to do it at a credit or break-even
I know you say you don’t roll PUTS, but what would you recommend with a stock like SOFI. Currently I have sold 10 CSPs at the $10.00 strike. My cost basis is $9.18, but the share price is now below $8.00. So I have been rolling my puts weekly while receiving credit while waiting for it to rebound. I would love to hear your thoughts.
Sorry, just seeing this. As of today, March 21, 2022, SOFI is trading at 9.57 which is above your cost basis. So you should be good, right?
@@rockwelltradingservices Yes, and I was assigned shares and I’m now selling CCs!!!
NICE!
Rollin' rollin' rollin' keep them doggies rollin'
Awesome! Thank you for watching! :)
To Put option premium sellers...........PLEASE PLACE A STOP LOSS!!!!!!
@warren mikes
"To Put option premium sellers.........PLEASE PLACE A STOP LOSS!!!!!!"
VERY bad advice.
You are guaranteeing that you will have losses by placing a STOP LOSS.
(The strategy you are suggesting should be called a GUARANTEED LOSS, not a STOP LOSS.)
With ROLLING an in the money put strike down, one strike price at a time, and out to a farther expiration, out far enough to earn a net credit,
you are being PAID to better your position, while AVOIDING assignment at an underwater price, AND avoiding STOP LOSSES.
In the last 2 years, I have sold thousands of cash secured puts, and ROLLED many of them, and I have NEVER had a net loss, only net profits.
A rolling stone, gathers no moss.
A rolling put, gathers no loss.
How would you have handled the stock RIDE
Red flag when you said "Never"😆
@@warrenmikes "How would you have handled the stock RIDE"
Funny you should ask, because I have posted many times about how I sold 10 cash secured puts at the $10 strike, back in June 2021, when RIDE was $11 per share.
I did not follow the Wheel Strategy by allowing the shares be assigned to me.
Instead, I rolled down to the $8 strike, then eventually down to the $5 strike with the 1/20/2023 expiration, and eventually experienced an early assignment on 11/21/2022, and ended up with 1,000 shares at $5 per share. I cut my capital at risk in half, and got PAID net credits to do it.
Ever since November 2022, I have been selling at the money cash secured puts for HUGE premiums.
As RIDE fell in price, I rolled the out of the money call strikes down, to at the money, for more HUGE premiums every week.
I currently have 10 covered calls with the $1.50 strike price, and the 4/21/2023 expiration.
As long as RIDE continues to trade, I will continue to sell covered calls to lower my break even.
If I were to close out this trade now, and sell the shares at the current market price, I would have a net loss of $2,020. That is a long way from my original capital at risk of $10k.
Since I have NOT closed out this trade, I only have an UNREALIZED LOSS, not a REALIZED LOSS, because the long campaign is on going.
I'm sure you also have a few stocks or ETF's that are underwater. You don't have a realized loss unless you sell.
By the way, just to give full disclosure, I also sold cash secured puts on AMC with the $40 strike, back in June 2021, and rolled them up or down as the share price rose and fell.
I currently hold 400 shares in my taxable trading account, with a break even price of $0.29. That's right, 29 cents a share.
$2,208 worth of AMC stock with only $116 at risk.
I also own 100 shares of AMC in my ROTH IRA with a zero$ break even.
$552 worth of stock with ZERO risk. I have earned enough premium to cover it.
I currently have covered calls with the $5 strike price in both accounts, earning HUGE ROI.
How do I calculate the ROI when the break even is zero?
All of this from the power of ROLLING for net credits, continuously.
Having a good put SELLING strategy, does not prevent you from choosing falling stocks.
Having a good put ROLLING strategy, CAN help you MAKE money on those falling stocks.
Knowledge IS power, ONLY if you apply that knowledge.
Markus, I also hope you are looking at other areas for a college.
Yes! We will go to Dartmouth next, and then we hit CA for Berkeley and a few others. 👍