So - you hate the "wheel" and yet you explain how you *would* trade it mid-way through the video (and say you do use the wheel). I respect your views but I disagree with your method of communication and approach. Nevertheless I added to your video views.
Its a scam, all of yeildmax are. They just take your money and keep buying synthetic and issues more shares everyday diluting the shareholding. Dividends are lesser and lesser.
Warning beginners: IMO, although credit spreads are "loss limited", if you loose the bet, and get assigned, money is gone and you're left empty handed. But if you do a Cash Secured Put instead, on a Stock with great fundamentals, or even better, an broad index ETF, you are almost certain to not loose money. You'll just have the capital locked for a while until the underlying recovers, no stress.
I think the example about /CL is wrong. If /CLK4 will be below $70 on April 14, 2024, you will be assigned the Futures contract. How can you sell a covered Call after you are assigned and the contract is already expired? I'm missing something?
Your confusion is warranted for options that share an expiration date with their underlying future. You can't, in fact, sell a call covered by the barrels of oil you just took delivery on. However, options usually expire before the expiration of the underlying future, which is always (I think) whatever the front-month future would be for the option's expiration date. Normally, you would be assigned the future that still has some time before its expiration, therefore you can run the wheel no problem. You would just need to keep rolling that future for as long as you want to hold it or get it called away, while being careful that the underlying future for the calls you write is the same as the one you hold. I.e., don't get assigned the April future then turn around and write a call against the June future. Hope that helps.
@@wade__ If you want to sell options with 60DTE or more, there is only one expiration date available, which is the last day the underlying Futures contract expires. Example: for the /CLN4 (57DTE from today) options the expiration date is Jun-14, which is also the day when the underlying Futures contract expires. So you can't sell options for 60DTE (or more) hoping to sell Calls if your Put is assigned.
I cringe every time I see someone promoting the wheel. Like you said it’s a strategy for an investor not a trader. Personally if I’m assigned I’m looking to put on a collar or at the money call
Hi Tom, thinking of joining your discord subscription channel. Do I have to wait till beginning of the month or it's just fine to join any time for the monthly fee?
Marcus Heitkotter was a guy selling the wheel strategy about 4 years ago when the market was going up, he stopped posting on his channel after 2022. Karl Domm subpoenaed for his trading records and it showed he only made 3% in 3 years and made 2 million selling courses on the wheel strategy.
He is still posting on his channel but does not show the results anymore as public as previous. It's a bit disappointing but I can understand it from a marketing perspective. But I also have to say RIDE was till now the only trade he really lost money on which vanished round about 200K from his 500K account and all his wins from 2021. But I think it was one of the first videos about the RIDE trade where he also said RIDE isn't a stock he wants to own (failed on his rule no.1) but almost promised to wheel out of it which he obviously missed. So the error was to stay in the trade although he said he failed on his rule nr 1 which is a bit of arrogant. On all other trades he made money on but I also do not like the way he pretend now that it never happened, or I missed a video about it. That's the only negative thing I can say about him, everything else is fine I think so. He teaches Options the way a dummy can understand it. I was never in his Mastermind but the videos are fine I think so.
I’m always taking with a pinch of salt when I see a person trying to sell their secret sauce to success making millions in trading and spruiking their courses online, most are fake! Most real self made millionaires are NOT online flogging $50 a month courses!!
while I appreciate this video, I am a bit surprised this was an opportunity to show how your portfolio of trades was impacted by an actual fairly large down day and VIX spike which we haven't had in a while and there is no update? Yes, I'm sure you covered it with people in the group but I generally appreciate your transparency so I was hopeful you would share when it isn't all "new all time highs" and profits and how you managed(or didn't adjust) with the volatility spike. Those are the real times to teach lessons I'd say. I do think it's a great channel was just hoping it would be talked about.
I made ROI of 40-60% two years in row wheeling some stocks, then lost almost all of it riding few sour grapes down to shitters, even doubled some down by BUYING LEAPs, ugh! Lessons learned, wont touch any single stocks in the future, only broad indexes (and futures) 👍
Hey sir, i know someone starting a wheel with buying a put leaps for hedge and only then starts selling weekly, after 6-8 weeks the put investment is returned and when it is 20-30% already too far, he rolls it closer, i was wondering what are your thoughts?
False equivalency. There are nuances you didn’t consider with your Titanic analogy. SPY goes down, all the indexes go down, but they always come back up. So far anyway. Do you know of a stock that has never gone down? Its like saying you can’t get on a rollercoaster because it goes down 🤷🏿♂️
Yeah the wheel can be tough especially with leverage. The 'Trade with Joseph' guy was down $150k on last year's 10% pullback. If we had crashed from there he could have wiped out his entire account. I prefer not to be assigned.
Glad to have you watching my channel too 😃 - I wasn’t down big in 2023 due to the wheel at normal size. I was trading too big. Thankfully I found Tom and Income Navigator and am sticking to a defined trade plan. It’s helped me immensely. Do I still do my Wheel + Covered Strangles? Yes. Love it. But won’t go too big. Happy trading and let’s all keep growing together 🙌🏼
Someone asked me a similar question just now on my daily live trading video from yesterday so I wanted to add more context... I don't wheel individual stocks. I only wheel futures. And, it is a very small percentage of my buying power now. Most of my buying power is assigned to positions that will perform better in a downturn like the 1-1-2 I learned from Tom King (I am so thankful I found him last year!) and like my new 1-2-3 strategy I just started placing this week. I am totally fine owning the S&P 500 and getting paid to do so, that is why I use my Wheel + Covered Strangle = Selling Options On Steroids process for the ES futures. I am also doing it for GC. It's all in my trade plan and overall represents a much lower percentage of Buying Power utilized vs the other strategies that will actually benefit in a downturn. I like diversifying strategies, underlyings, DTE, etc. This is just part of my diversification. :-) Do I want the markets to go down? No. But, honestly, I cannot wait until some of my 1-1-2 and 1-2-3 strategies land in the bear trap / ratio spread tent. That will help offset any losses on the much smaller wheel + covered strangle positions. I just felt that I needed to add this additional information for anyone that saw this thread. Let's all keep growing together. Happy trading!
Thank you Tom. I am a big fan. Love the Income Navigator service. But, I do have to push back on a statement that you made in this video. You said that the only way that a person is happy getting assigned/owning the underlying stock/ETF/Future is "because the trade went against you." That is not true, at least not for me. You can pick the price that you want to get long and get paid to wait for assignment at your predetermined entry price. I've done it many times, and then I hold the stock or position from there, for years sometimes. When it gets near my exit price, I sell the covered call. I firmly believe that an investor or trader should have an exit strategy for any potential trade, before they enter it. That has worked very well for me, and I do believe that selling calls against long positions is a conservative way to increase returns and lower cost basis while waiting for your predetermined exit price. Once again, thank you for all that you have done and continue to do for so many people, me included. You are helping so many people get better. Awesome.
I am a new follower of his and really enjoy his thoughts but I agree with you also but I am trader investor ( used to just be a trader). I love the wheel on stocks I hold but I have been trading for over 30 years and have been flat ass broke a few times.. But I do like his futures ideas I plan on learning this soon
Nitpicking perhaps but I'll be that guy: at 17:30 you start to frame selling a put as an undefined risk trade. Specifically you mention it's not right for beginners because you can have infinite losses. That is factually incorrect. Being short stock to the upside has infinite loss potential. What you are probably getting at is 'Can a stock go to 0?' Absolutely. But to have unlimited loss potential it would have to be able to go to
Wow, how far off base can you be! I’ve got a counter to each of your ‘cons’. I’ve enjoyed learning from your futures videos, but because you hate the wheel, you’re not reviewing it fairly and making a lot of negative assumptions. For example, you never mention rolling. Sell a covered call, stock climbs thru it, so roll it up and out for additional credit and upside… simple. I’ve been trading this strategy before it had a name successfully and will continue to do so, and promote it to others. Oh, and it was really unfair to throw in an oil futures example, as it has nothing to do with the intent of the Wheel which is for stocks.
I feel you are being a bit disingenuous, fair enough that you don't like the strategy, but who would buy Tesla at 188 and sell at 195.... you'd sell at 250? The 112 can have unlimited losses? Backtest the wheel on Microsoft, Amazon, Apple. Don't be a trader or investor, be a money maker.
Pro move: buy two later OTM puts with a lower strike than the put you are selling to cap your losses and even make a profit if the stock tanks. More often than not if a stock suddenly tanks the volatility will also skyrocket, making the puts worth a lot even if their strike is below your assignment.
It's funny that you mention Buffet, that is exactly how he got into coke (KO). He sold put options for the price he thought was favorable and got assigned. But, it's what he wanted anyway and he got it at his price.
So... Mr. King greatly dislikes being exposed to having to buy an underlying with a cash covered put. And yet he glorifies the 112 which also exposes him to ownership with TWO OTM put sales. His basics of 112 video has the line "it is also a way to purchase the underlying for a very steep discount". But Mr. King... you spoke of the idiocy of using a cash covered put as it puts a person at risk of having to buy the underlying at a discount. Hypocritical wheel video.
Please invest a little bit of time understanding how the 112 works and how it is managed. The short puts are very high probability (95%) which means 5% risk of assignment. Also, the objective is to never get assigned (that’s the risk management). Besides, the capital efficiency and return on capital is unbeatable when you trade options on futures.
@@bharatchitnavis9592 the unbeatable leverage comes with risk there is no free lunch and if you get assigned those futures contracts you can continue to drop and wipe out your account. Tom is a good trader but he’s ego gave him tunnel vision and does not see the hypocrisy of badmouthing the wheel when the 112 strategy has its own set of risks and cons. Any strategy can suck if you trade it like a noob
1:12 I mostly sell covered calls, occasionally cash secured puts, but I always treat the premium as a basis reduction. For me it doesn't have anything to do with which way the stock is moving, it's just easier for me to keep track of profit per share when I finally sell the stock. You're right, it's income, but most of my trading is in IRAs so it doesn't feel like income and I guess technically it isn't. I much prefer selling calls over puts. If I like a stock, which includes liking the premium on calls, I usually just buy it and sell a call soon after. I will sometimes sell very short term puts expiring the same week or maybe the week after, instead of buying the stock outright right away. I typically sell weekly calls too or at least short term, sometimes 2 or 3 weeks out. Rarely do I sell them more than a month or 6 weeks out. You mentioned liking the further out calls, but typically I can collect more premium in total by selling a weekly call 12-14 times than I would selling a call expiring three months out. Plus I'm not locked into a single strike price that whole time and can adjust the strike every week or two with the stock price. Thanks for the video.
Tom, thanks for the video. You've mentioned many times that your annual returns beat the returns of an index like the S&P500 by many percentage points. If that type of consistency is maintained for many many years, one would expect huge returns due to the compounding. So, why would anyone want to risk buying and holding individual company stocks over the strategy of selling premium and beating index returns?
Any strategy can burn 🔥 ours accounts if we don't know what we are doing..... doing PCS on Tesla went is going down can burn 🔥 your account as well, so sometimes is not the strategy is ours knowledge of what we are doing!
in my experience with the wheel, a few things are most important. 1: the stock cant be overbought(because pull backs can be more severe even on great stocks) 2: always sell puts at prices that make sense valuation-wise. ive been running the wheel for years and ive only been burnt once selling risky put options during a severe market pullback. after i messed up that one time, i choose a low delta on great stocks that have recently pulled back or are trading at low valuation sideways. i consistently get about 40% apr on my money which is about 3.5% monthly and the risks are near zero. you can sell more risky options on over valued stocks and get much higher premiums, but you are begging to lose alot of money.
33:31 When MCD drops below 280, the 295 call will be worth less than 2.00, and you won't be able to sell for 5.00. Same on 35:45, when your CL gets assigned at 70, the 77 call may be worth less than 1.50.
20:17 Tom, I like your theta trading mentality. However, I don’t think it’s fair what you say here about unlimited losses and capped gains. That’s exactly what selling premium for high probability wins is. I don’t like the wheel much either. But, if you avoid getting assigned, aren’t you just selling naked puts? You love that!
A safer time to buy a CSP is for example when your target Buy price of the stock is $90 (you refuse to pay more), AND the stock is trading at $100 and neutral to Bullish. High IV will give you more premium but that translates to volatilty, which is risky...even tho the premium is better. You may as well make some premium rather than just sitting around waiting for it to fall to $90.... Unless of course you have other places to put your money to work.
Hey Tom , how do you feel about Tesla stock bounce back now ? If folks get their short put assigned , patience is all you need if you choose the right stock or SPY/QQQ/IWM … So I don’t agree with all your statements about wheel ..
Also...be careful selling Covered Calls on high growth stocks. They gap up fast, blow thru your short CALL, and youve limited your upside. Just like he said ... I agree. Also You might think you can chase it by rolling up and out but sometimes the growth stock goes up so fast that you really can't keep up with the roll up and out.... Unless you roll it out a very very long time in the future..... This happened to me with a few contracts of AMZN. People who sold covered calls on Microsoft also lost out on a lot of upside when the stock shot up like a rocket. Dont be penny wise and pound foolish on growth stocks.
Tom, what is a mystery to me is how a company's valuation can change from day to day or even hour to hour. Who determines this? Who or what is actually manipulating the prices of stocks and options with such frequency? It is like when negative news hits the street and suddenly the entire market declines. Those companies have not intrinsically changed. They are the same as yesterday. Yet, prices decline. Maybe you could comment on this. Great info on this video BTW.
Wish I would have found this video sooner. Currently tied up in some stocks I don’t want to be in due to trying the wheel strategy. Going to try and continue collecting premium, but am bag holding some stocks at this point. Great video, very educational!
For me it's a very distinct set between premium collection and basis reduction: Premium collection when I'm hyper-wheeling futures. I just want the premium and I want in and out as fast as possible. Using weekly ATM puts to start, getting out with weekly ATM calls to close. I don't worry about the actual points from the contracts (much) but more so the premium. Basis reduction is when I get some kind of quick run up or gap in my long-term portfolio I'll sell a far OTM call at for whichever ticker had the run-up. If it keeps running I get some gains, but mostly just want to get a small bit of cash back against my positive position. So not even a true "wheel" just the similar mechanics. I also make sure not to sell calls against tax lots with a
don’t like it one bit. I don’t like anything naked. you can make enough with credit spreads etc. you wanna be a superhero trader & make big bucks…get directional & buy options than. Just how I see it
I think The Wheel is even worse than described here. In fact, I find the term offensive because it implies that this is a wonderful and complete perpetual motion machine to just keep on generating profits and making life easy and wonderful for the trader. I use options only when I exactly choose to, not because The Wheel has rolled around again.
Thank you Tom. One question? How do you wheel on futures? I thought all futures were cash settled? If you got assigned on oil, what happens then in order to allow you to then sell a call??
I have same question. I think you need to take assignment on futures that is not expiring and sell covered call until expiration..I haven't done it..but it's confusing when they talk about futures assignment.
An ITM call will almost always pay more than a put in premium at the same strike...if you actually are willing to own it like these wheel people talk about, then why would you accept less by selling a put when you could make more with a covered call... day trade be cash at the close everyday.
Many reasons, people may factor in the buying power and commission costs, which can be less for selling the put alone. Another is versatility, as one may start by selling a put then add another leg (later on, not necessarily on the same day).
Imo u have to look at the wheel as a way to long term invest and make premiums while u hold... and weekly seems to be better.... seems to be good to let them assign and rebuy the dip or sell cash secure puts back less than u sold them... its true tho sometimes its best to buy heavy shares and sell the rips.. good to do both. And i agree good for long term investing... buy and hold sucks but buy hold and make premiums while u hold is great. Also save money to avg down incase the stock has a bad week.. never buy ath and dont touch ath stocks.. good rules u have to stick to...
Stumbled across your channel. Not sure how you got in my brain, and were watching the last decade of my investment life - but, wow. I'm either laughing or crying....
Thanks Tom. Great Video. I hate the idea of selling covered calls on a stock soon after assignment. It seems like a conflict of interest when selling covered calls vs wanting to own the share when assigned.
This is an excellent video. Gives you accurate pros and cons. The wheel can be profitable BUT dangerous. Consider vertical credit spreads to define your risk. You will sleep better.
Tom, I listened to you complain about the various aspects of the wheel for the whole video waiting for what it is you would do instead. Then finally, you gave us a small snippet of why you like to trade the wheel using futures. Have you already published a video on wheeling Futures and if not then can you please do an updated one so RUclips will recommend it? That was the first time I heard someone say they can Wheel Futures…thanks!
Thanks for the content and I appreciate the insights. At times it’s a little difficult to not get distracted by the hundreds of “ok’s”. Aside from those, I really appreciate the style as well. Hopefully you keep providing good videos. Thanks again.
Perfect explanation, as always. I never liked that damned thing, for the same reasons, you so eloquently laid out…. The wheel can literally kill you (COVID 2020, anyone ?). Where is the guarantee the stock stops falling down ? One of the riskiest and most dangerous and expensive strategies out there…..
You were probably trading bad stocks or you went all in at once. Trade indexes and sector ETF's and you wont have that problem. if you think doing the wheel is dangerous imagine following Tom king strategies with Futures options lol.
@@jacksmith-yq5my yep I been trading a covered strangle on TQQQ for the past 2 years with great success its liquid great premium and since I can cash secure it I sleep great at night knowing that if we get a huge crash I can cont to roll out and down or simply get assigned ( worst case scenario) sell Covered calls and wait it out until it comes back. Cant say the same with futures contracts unless you have ton of money and can withstand the drop plus the volatility expansion.
Hey Tom, i know someone starting a wheel with buying a put leaps for years hedge and only then starts selling weekly, after put investment cost is returned you see profits, and when price move 20-30% already and put is too far, he rolls it closer, i was wondering what are your thoughts?
Funny you mention Tesla.... Here is a story to add: I was selling PUTS on TSLA (about 3% profit on capital) & recently got assigned @ 215. Break even about 209 from my original Put premium of 6.90. Last week sold a 210/call for 3.95, so am slowly trying to crawl back to base. My 1st wheel was a few years back on BABA. Making great prem from short puts! Then assigned at $240...Lost loads. BABA never recovered and I ended up selling the stock for under 90 bucks!!!!
That is the reality of Wheel of any version! I have had very similar experience. To me Wheel is just a useless strategy. You just make very small on the PUT premium and hard make anything on the CALL Premium while missing on the uptrend (actual time to make money) Doing Wheel on stocks is just stupid IMHO. Doing it on major Indices may be have some value but then the returns are not lucrative at all.
So - you hate the "wheel" and yet you explain how you *would* trade it mid-way through the video (and say you do use the wheel). I respect your views but I disagree with your method of communication and approach. Nevertheless I added to your video views.
Good information. I agree with Tom. I started comparing my returns against just owning QQQ. If I can’t beat QQQ then why be a trader?
BTW, Yield Max TSLY is doing a reverse split. Lol.
Its a scam, all of yeildmax are. They just take your money and keep buying synthetic and issues more shares everyday diluting the shareholding. Dividends are lesser and lesser.
Warning beginners: IMO, although credit spreads are "loss limited", if you loose the bet, and get assigned, money is gone and you're left empty handed. But if you do a Cash Secured Put instead, on a Stock with great fundamentals, or even better, an broad index ETF, you are almost certain to not loose money. You'll just have the capital locked for a while until the underlying recovers, no stress.
could you elaborate? Credit spreads vs cash sec puts?
I think the example about /CL is wrong. If /CLK4 will be below $70 on April 14, 2024, you will be assigned the Futures contract. How can you sell a covered Call after you are assigned and the contract is already expired? I'm missing something?
Was wondering the same
Your confusion is warranted for options that share an expiration date with their underlying future. You can't, in fact, sell a call covered by the barrels of oil you just took delivery on. However, options usually expire before the expiration of the underlying future, which is always (I think) whatever the front-month future would be for the option's expiration date. Normally, you would be assigned the future that still has some time before its expiration, therefore you can run the wheel no problem. You would just need to keep rolling that future for as long as you want to hold it or get it called away, while being careful that the underlying future for the calls you write is the same as the one you hold. I.e., don't get assigned the April future then turn around and write a call against the June future. Hope that helps.
@@wade__ If you want to sell options with 60DTE or more, there is only one expiration date available, which is the last day the underlying Futures contract expires. Example: for the /CLN4 (57DTE from today) options the expiration date is Jun-14, which is also the day when the underlying Futures contract expires. So you can't sell options for 60DTE (or more) hoping to sell Calls if your Put is assigned.
I find these only work in neutral or bullish markets.
I cringe every time I see someone promoting the wheel. Like you said it’s a strategy for an investor not a trader. Personally if I’m assigned I’m looking to put on a collar or at the money call
Hi Tom, thinking of joining your discord subscription channel. Do I have to wait till beginning of the month or it's just fine to join any time for the monthly fee?
Anytime. Come on in.
Marcus Heitkotter was a guy selling the wheel strategy about 4 years ago when the market was going up, he stopped posting on his channel after 2022. Karl Domm subpoenaed for his trading records and it showed he only made 3% in 3 years and made 2 million selling courses on the wheel strategy.
Markus is still pitching his service. RIDE 🙄
LOL@@Thetatraderz
He is still posting on his channel but does not show the results anymore as public as previous. It's a bit disappointing but I can understand it from a marketing perspective. But I also have to say RIDE was till now the only trade he really lost money on which vanished round about 200K from his 500K account and all his wins from 2021. But I think it was one of the first videos about the RIDE trade where he also said RIDE isn't a stock he wants to own (failed on his rule no.1) but almost promised to wheel out of it which he obviously missed. So the error was to stay in the trade although he said he failed on his rule nr 1 which is a bit of arrogant. On all other trades he made money on but I also do not like the way he pretend now that it never happened, or I missed a video about it. That's the only negative thing I can say about him, everything else is fine I think so. He teaches Options the way a dummy can understand it. I was never in his Mastermind but the videos are fine I think so.
I bought the platform and almost blew up my account...
I’m always taking with a pinch of salt when I see a person trying to sell their secret sauce to success making millions in trading and spruiking their courses online, most are fake! Most real self made millionaires are NOT online flogging $50 a month courses!!
This is the one and only YT channel regarding market trading that is real. Never have liked the "wheel" for all the reasons you stated.
the wheel has been my most profitable strategy i have ever used
while I appreciate this video, I am a bit surprised this was an opportunity to show how your portfolio of trades was impacted by an actual fairly large down day and VIX spike which we haven't had in a while and there is no update? Yes, I'm sure you covered it with people in the group but I generally appreciate your transparency so I was hopeful you would share when it isn't all "new all time highs" and profits and how you managed(or didn't adjust) with the volatility spike. Those are the real times to teach lessons I'd say. I do think it's a great channel was just hoping it would be talked about.
No comment from Tom, Huh?
I made ROI of 40-60% two years in row wheeling some stocks, then lost almost all of it riding few sour grapes down to shitters, even doubled some down by BUYING LEAPs, ugh! Lessons learned, wont touch any single stocks in the future, only broad indexes (and futures) 👍
This is the way
Hey sir, i know someone starting a wheel with buying a put leaps for hedge and only then starts selling weekly, after 6-8 weeks the put investment is returned and when it is 20-30% already too far, he rolls it closer, i was wondering what are your thoughts?
Is using the wheel on the TQQQ something traders are doing?
Which sour grapes, which stocks caused those losses g?
@@lit3585 Blackberry 😬
That's why you only do wheels strategy on stocks you actually want to own.... naked puts are crazy dangerous
False equivalency. There are nuances you didn’t consider with your Titanic analogy. SPY goes down, all the indexes go down, but they always come back up. So far anyway. Do you know of a stock that has never gone down? Its like saying you can’t get on a rollercoaster because it goes down 🤷🏿♂️
Why sell puts on a stock you don’t really want? I want to be assigned on my puts, your thought process is way different then mine.
Yeah the wheel can be tough especially with leverage. The 'Trade with Joseph' guy was down $150k on last year's 10% pullback. If we had crashed from there he could have wiped out his entire account. I prefer not to be assigned.
Glad to have you watching my channel too 😃 - I wasn’t down big in 2023 due to the wheel at normal size. I was trading too big. Thankfully I found Tom and Income Navigator and am sticking to a defined trade plan. It’s helped me immensely. Do I still do my Wheel + Covered Strangles? Yes. Love it. But won’t go too big. Happy trading and let’s all keep growing together 🙌🏼
Someone asked me a similar question just now on my daily live trading video from yesterday so I wanted to add more context... I don't wheel individual stocks. I only wheel futures. And, it is a very small percentage of my buying power now. Most of my buying power is assigned to positions that will perform better in a downturn like the 1-1-2 I learned from Tom King (I am so thankful I found him last year!) and like my new 1-2-3 strategy I just started placing this week. I am totally fine owning the S&P 500 and getting paid to do so, that is why I use my Wheel + Covered Strangle = Selling Options On Steroids process for the ES futures. I am also doing it for GC. It's all in my trade plan and overall represents a much lower percentage of Buying Power utilized vs the other strategies that will actually benefit in a downturn. I like diversifying strategies, underlyings, DTE, etc. This is just part of my diversification. :-) Do I want the markets to go down? No. But, honestly, I cannot wait until some of my 1-1-2 and 1-2-3 strategies land in the bear trap / ratio spread tent. That will help offset any losses on the much smaller wheel + covered strangle positions. I just felt that I needed to add this additional information for anyone that saw this thread. Let's all keep growing together. Happy trading!
Thank you Tom. I am a big fan. Love the Income Navigator service. But, I do have to push back on a statement that you made in this video. You said that the only way that a person is happy getting assigned/owning the underlying stock/ETF/Future is "because the trade went against you." That is not true, at least not for me. You can pick the price that you want to get long and get paid to wait for assignment at your predetermined entry price. I've done it many times, and then I hold the stock or position from there, for years sometimes. When it gets near my exit price, I sell the covered call. I firmly believe that an investor or trader should have an exit strategy for any potential trade, before they enter it. That has worked very well for me, and I do believe that selling calls against long positions is a conservative way to increase returns and lower cost basis while waiting for your predetermined exit price. Once again, thank you for all that you have done and continue to do for so many people, me included. You are helping so many people get better. Awesome.
I am a new follower of his and really enjoy his thoughts but I agree with you also but I am trader investor ( used to just be a trader). I love the wheel on stocks I hold but I have been trading for over 30 years and have been flat ass broke a few times.. But I do like his futures ideas I plan on learning this soon
I guess he didnt feel like responding to your informative post. Well, i liked it. Thx
Nitpicking perhaps but I'll be that guy: at 17:30 you start to frame selling a put as an undefined risk trade. Specifically you mention it's not right for beginners because you can have infinite losses. That is factually incorrect. Being short stock to the upside has infinite loss potential. What you are probably getting at is 'Can a stock go to 0?' Absolutely. But to have unlimited loss potential it would have to be able to go to
Wow, how far off base can you be! I’ve got a counter to each of your ‘cons’. I’ve enjoyed learning from your futures videos, but because you hate the wheel, you’re not reviewing it fairly and making a lot of negative assumptions. For example, you never mention rolling. Sell a covered call, stock climbs thru it, so roll it up and out for additional credit and upside… simple. I’ve been trading this strategy before it had a name successfully and will continue to do so, and promote it to others. Oh, and it was really unfair to throw in an oil futures example, as it has nothing to do with the intent of the Wheel which is for stocks.
Any thoughts on using the TQQQ as the underlying for the Wheel?
@@jacksmith-yq5my bingo!
I feel you are being a bit disingenuous, fair enough that you don't like the strategy, but who would buy Tesla at 188 and sell at 195.... you'd sell at 250? The 112 can have unlimited losses? Backtest the wheel on Microsoft, Amazon, Apple. Don't be a trader or investor, be a money maker.
Pro move: buy two later OTM puts with a lower strike than the put you are selling to cap your losses and even make a profit if the stock tanks.
More often than not if a stock suddenly tanks the volatility will also skyrocket, making the puts worth a lot even if their strike is below your assignment.
thanks for your thoughts and Ideas I have been building a portfolio over the years. I am looking forward to learning the futures ideas you like
It's funny that you mention Buffet, that is exactly how he got into coke (KO). He sold put options for the price he thought was favorable and got assigned. But, it's what he wanted anyway and he got it at his price.
So... Mr. King greatly dislikes being exposed to having to buy an underlying with a cash covered put. And yet he glorifies the 112 which also exposes him to ownership with TWO OTM put sales. His basics of 112 video has the line "it is also a way to purchase the underlying for a very steep discount". But Mr. King... you spoke of the idiocy of using a cash covered put as it puts a person at risk of having to buy the underlying at a discount. Hypocritical wheel video.
Please invest a little bit of time understanding how the 112 works and how it is managed. The short puts are very high probability (95%) which means 5% risk of assignment. Also, the objective is to never get assigned (that’s the risk management). Besides, the capital efficiency and return on capital is unbeatable when you trade options on futures.
@@bharatchitnavis9592 the unbeatable leverage comes with risk there is no free lunch and if you get assigned those futures contracts you can continue to drop and wipe out your account. Tom is a good trader but he’s ego gave him tunnel vision and does not see the hypocrisy of badmouthing the wheel when the 112 strategy has its own set of risks and cons. Any strategy can suck if you trade it like a noob
Wheel only with top shelf stocks
AAPL or AMZN for me
Like CSCO in Jan 2000?
@@forrestgump1773 ?
be careful listening to this guy, highly questionable mindset around investing
lol. Selling naked puts…. Super risky. Gl with that
1:12 I mostly sell covered calls, occasionally cash secured puts, but I always treat the premium as a basis reduction. For me it doesn't have anything to do with which way the stock is moving, it's just easier for me to keep track of profit per share when I finally sell the stock. You're right, it's income, but most of my trading is in IRAs so it doesn't feel like income and I guess technically it isn't. I much prefer selling calls over puts. If I like a stock, which includes liking the premium on calls, I usually just buy it and sell a call soon after. I will sometimes sell very short term puts expiring the same week or maybe the week after, instead of buying the stock outright right away.
I typically sell weekly calls too or at least short term, sometimes 2 or 3 weeks out. Rarely do I sell them more than a month or 6 weeks out. You mentioned liking the further out calls, but typically I can collect more premium in total by selling a weekly call 12-14 times than I would selling a call expiring three months out. Plus I'm not locked into a single strike price that whole time and can adjust the strike every week or two with the stock price.
Thanks for the video.
I will gladly get assigned at resistance, but Im an investor. Option premium to me is the gravy, or the icing on the cake.
Tom, thanks for the video. You've mentioned many times that your annual returns beat the returns of an index like the S&P500 by many percentage points. If that type of consistency is maintained for many many years, one would expect huge returns due to the compounding. So, why would anyone want to risk buying and holding individual company stocks over the strategy of selling premium and beating index returns?
Yes, exactly
Any strategy can burn 🔥 ours accounts if we don't know what we are doing..... doing PCS on Tesla went is going down can burn 🔥 your account as well, so sometimes is not the strategy is ours knowledge of what we are doing!
Great video. Thank you!
I dont think you understand why people wheel. Just keep gambling naked puts.
@@NeoSoulCrew LOL
in my experience with the wheel, a few things are most important. 1: the stock cant be overbought(because pull backs can be more severe even on great stocks) 2: always sell puts at prices that make sense valuation-wise. ive been running the wheel for years and ive only been burnt once selling risky put options during a severe market pullback. after i messed up that one time, i choose a low delta on great stocks that have recently pulled back or are trading at low valuation sideways. i consistently get about 40% apr on my money which is about 3.5% monthly and the risks are near zero. you can sell more risky options on over valued stocks and get much higher premiums, but you are begging to lose alot of money.
So the wheel is dangerous but selling "naked" puts are not. The fact that one is covered and the other is naked shows the wheel is safer.
Yeah I'm not sure why he would base his income on naked puts. Seems very risky.
33:31 When MCD drops below 280, the 295 call will be worth less than 2.00, and you won't be able to sell for 5.00. Same on 35:45, when your CL gets assigned at 70, the 77 call may be worth less than 1.50.
20:17 Tom, I like your theta trading mentality. However, I don’t think it’s fair what you say here about unlimited losses and capped gains. That’s exactly what selling premium for high probability wins is. I don’t like the wheel much either. But, if you avoid getting assigned, aren’t you just selling naked puts? You love that!
Unlimited losses in down trend, capped during uptrend. Same as 1-1-2?
A safer time to buy a CSP is for example when your target Buy price of the stock is $90 (you refuse to pay more), AND the stock is trading at $100 and neutral to Bullish.
High IV will give you more premium but that translates to volatilty, which is risky...even tho the premium is better. You may as well make some premium rather than just sitting around waiting for it to fall to $90.... Unless of course you have other places to put your money to work.
At last, somebody saying what I've been thinking for at least 12 months.
Hey Tom , how do you feel about Tesla stock bounce back now ? If folks get their short put assigned , patience is all you need if you choose the right stock or SPY/QQQ/IWM …
So I don’t agree with all your statements about wheel ..
Also...be careful selling Covered Calls on high growth stocks. They gap up fast, blow thru your short CALL, and youve limited your upside. Just like he said ... I agree. Also You might think you can chase it by rolling up and out but sometimes the growth stock goes up so fast that you really can't keep up with the roll up and out.... Unless you roll it out a very very long time in the future..... This happened to me with a few contracts of AMZN. People who sold covered calls on Microsoft also lost out on a lot of upside when the stock shot up like a rocket. Dont be penny wise and pound foolish on growth stocks.
Tom, what is a mystery to me is how a company's valuation can change from day to day or even hour to hour. Who determines this?
Who or what is actually manipulating the prices of stocks and options with such frequency?
It is like when negative news hits the street and suddenly the entire market declines. Those companies have not intrinsically changed. They are the same as yesterday. Yet, prices decline.
Maybe you could comment on this. Great info on this video BTW.
Wish I would have found this video sooner. Currently tied up in some stocks I don’t want to be in due to trying the wheel strategy. Going to try and continue collecting premium, but am bag holding some stocks at this point. Great video, very educational!
My biggest losses in my trading career have been because of the wheel
Then learn how to roll options.
For me it's a very distinct set between premium collection and basis reduction:
Premium collection when I'm hyper-wheeling futures. I just want the premium and I want in and out as fast as possible. Using weekly ATM puts to start, getting out with weekly ATM calls to close. I don't worry about the actual points from the contracts (much) but more so the premium.
Basis reduction is when I get some kind of quick run up or gap in my long-term portfolio I'll sell a far OTM call at for whichever ticker had the run-up. If it keeps running I get some gains, but mostly just want to get a small bit of cash back against my positive position. So not even a true "wheel" just the similar mechanics. I also make sure not to sell calls against tax lots with a
don’t like it one bit. I don’t like anything naked. you can make enough with credit spreads etc. you wanna be a superhero trader & make big bucks…get directional & buy options than. Just how I see it
The Wheel is a perfect example of a strategy that works until it doesn't.
What happens if after getting assigned after first time you holding the underlying and then overnight underlying tanks in a very very bad way ?
what expiration do you use for the covered calls? Same as the put? Great video, thank you
I think The Wheel is even worse than described here. In fact, I find the term offensive because it implies that this is a wonderful and complete perpetual motion machine to just keep on generating profits and making life easy and wonderful for the trader. I use options only when I exactly choose to, not because The Wheel has rolled around again.
Great video as always 👏🏼👏🏼
Selling covered calls on a declining stock isn't worth because the premiums are so low.
Thank you Tom. One question? How do you wheel on futures? I thought all futures were cash settled? If you got assigned on oil, what happens then in order to allow you to then sell a call??
I have same question.
I think you need to take assignment on futures that is not expiring and sell covered call until expiration..I haven't done it..but it's confusing when they talk about futures assignment.
An ITM call will almost always pay more than a put in premium at the same strike...if you actually are willing to own it like these wheel people talk about, then why would you accept less by selling a put when you could make more with a covered call... day trade be cash at the close everyday.
Many reasons, people may factor in the buying power and commission costs, which can be less for selling the put alone. Another is versatility, as one may start by selling a put then add another leg (later on, not necessarily on the same day).
Why not do it with an index and use ETF as the equity part, I do it in India with Nifty50
Imo u have to look at the wheel as a way to long term invest and make premiums while u hold... and weekly seems to be better.... seems to be good to let them assign and rebuy the dip or sell cash secure puts back less than u sold them... its true tho sometimes its best to buy heavy shares and sell the rips.. good to do both. And i agree good for long term investing... buy and hold sucks but buy hold and make premiums while u hold is great. Also save money to avg down incase the stock has a bad week.. never buy ath and dont touch ath stocks.. good rules u have to stick to...
Stumbled across your channel. Not sure how you got in my brain, and were watching the last decade of my investment life - but, wow. I'm either laughing or crying....
Don't sell puts on the Titanic!
Covered strangle > Wheel
Good one
I'm just getting into options and this a very vauable advice on the wheel strat ..
Thanks Tom. Great Video. I hate the idea of selling covered calls on a stock soon after assignment. It seems like a conflict of interest when selling covered calls vs wanting to own the share when assigned.
You can make the 10% in credit spreads with major indexes, if you want that much.
For a longer term portfolio I like the collar. When you have 100 shares of stock at risk I like to have paid for protection
Love the sarcasm😁
NAKED PUT = Unlimited loss
You are comparing apples and fire.
LOLZ
Great video 💪🏼
Fantastic breakdown
If you don’t own stocks what’s in your ira??
@@groovestreet77 options on futures. Ive covered this a lot.
Great video! Looking forward to watching part 2!
This is an excellent video.
Gives you accurate pros and cons.
The wheel can be profitable BUT dangerous.
Consider vertical credit spreads to define your risk. You will sleep better.
Tom, I listened to you complain about the various aspects of the wheel for the whole video waiting for what it is you would do instead. Then finally, you gave us a small snippet of why you like to trade the wheel using futures. Have you already published a video on wheeling Futures and if not then can you please do an updated one so RUclips will recommend it? That was the first time I heard someone say they can Wheel Futures…thanks!
Thanks for the content and I appreciate the insights. At times it’s a little difficult to not get distracted by the hundreds of “ok’s”. Aside from those, I really appreciate the style as well. Hopefully you keep providing good videos. Thanks again.
Perfect explanation, as always. I never liked that damned thing, for the same reasons, you so eloquently laid out…. The wheel can literally kill you (COVID 2020, anyone ?). Where is the guarantee the stock stops falling down ? One of the riskiest and most dangerous and expensive strategies out there…..
You were probably trading bad stocks or you went all in at once. Trade indexes and sector ETF's and you wont have that problem. if you think doing the wheel is dangerous imagine following Tom king strategies with Futures options lol.
@@albo84 Like TQQQ? They say its a leveraged asset, the IV is always high....two sides to that I guess
@@jacksmith-yq5my yep I been trading a covered strangle on TQQQ for the past 2 years with great success its liquid great premium and since I can cash secure it I sleep great at night knowing that if we get a huge crash I can cont to roll out and down or simply get assigned ( worst case scenario) sell Covered calls and wait it out until it comes back. Cant say the same with futures contracts unless you have ton of money and can withstand the drop plus the volatility expansion.
Very timely insight on ROKU!
What's your take on the daily 0 or 1 dte wheel on SPY, QQQ, OR IWM 0.15-0.3 delta? I Have seen traders make around 3-4% per month.
Its not my thing. I have a 0 DTE strategy I use with a 93% win rate. I don't have room for more strategies for now.
I sell puts all the time on good stocks and depending on the chart I can take delivery and wheel of roll out the put for more credit and time.
Hey Tom, i know someone starting a wheel with buying a put leaps for years hedge and only then starts selling weekly, after put investment cost is returned you see profits, and when price move 20-30% already and put is too far, he rolls it closer, i was wondering what are your thoughts?
Thanks
Interesting. So what do you recommend as a good strategy? Also, what do you do with an IRA if you're not investing?
Helpful.......good opinion...
Tom - do you have a video that talks about building a delta neutral IRA portfolio?
Funny you mention Tesla.... Here is a story to add: I was selling PUTS on TSLA (about 3% profit on capital) & recently got assigned @ 215. Break even about 209 from my original Put premium of 6.90. Last week sold a 210/call for 3.95, so am slowly trying to crawl back to base. My 1st wheel was a few years back on BABA. Making great prem from short puts! Then assigned at $240...Lost loads. BABA never recovered and I ended up selling the stock for under 90 bucks!!!!
That is the reality of Wheel of any version! I have had very similar experience. To me Wheel is just a useless strategy. You just make very small on the PUT premium and hard make anything on the CALL Premium while missing on the uptrend (actual time to make money) Doing Wheel on stocks is just stupid IMHO. Doing it on major Indices may be have some value but then the returns are not lucrative at all.
Stop using the wheel on single stocks thats your downfall. Utilize index and sector ETF’s
@@jigneshsoni9263 the wheel is amazing, picking a losing stock doesnt invalidate the wheel.
@@albo84 or learn how to roll options
if you sell a call it traps you
The stock will go up and you can’t get out
Make puts is not allowed
Hello Tom, I am have been trying to join your discord using the promo code, but I am beging kickout. I emailed and call tech support.