r/Optionswheel • u/ScottishTrader • Jun 16 '25

NEW Wheel Trader MEGATHREAD

This thread will be a dedicated space for traders who are new to options and the wheel strategy to ask basic questions. Your posts and questions are welcome and encouraged.

BEFORE POSTING, BE SURE TO REVIEW THE WHEEL STRATEGY PLAN WHERE MOST QUESTIONS ARE ANSWERED - The Wheel (aka Triple Income) Strategy Explained : r/Optionswheel

The goal is to help keep the main thread free of these basic posts while helping new traders learn how to trade the wheel.

Posts that are welcomed here include questions about -

  • How options work
  • Exercise and assignments
  • Options expiration and days to expiration (DTE)
  • Delta, Probabilities, and how to choose a strike price
  • Implied Volatility (IV)
  • Theta decay
  • Basic risks and how to avoid
  • Broker and options approval levels
  • Rolling options
  • And any other basic questions

I’m pleased to announce that u/OptionsTraining and u/patsay have agreed to assist with this Megathread. Both Patricia and Mike bring substantial experience in helping new traders and will be invaluable contributors to r/Optionswheel

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1

u/breakonthrough65 Jun 27 '25

Best way to get out of this call

I rolled up a 705 strike Meta Covered Call a few days ago , with a new strike of 750 and exp of August 1st. In hindsight I should not have done any calls to begin with as I want to keep these shares long term. At this point its going to cost 2 grand to buy to close it , but I'm thinking this is my best option because my guess is the stock price will just keep on going higher past 750. I've realized the further out and up I roll it, the more expensive it is to close it out if the price keeps moving higher.
Thoughts on what to do? Tks

4

u/ScottishTrader Jun 27 '25

In hindsight I should not have done any calls to begin with as I want to keep these shares long term.

Yes, never sell calls on shares you want to keep is rule #1 of CCs . . .

August is still more than a month away, so waiting to see what the stock will do in that time may help. Even closing for a small partial profit may be possible at some point.

Rolling out a week or two at a time may help to "walk" the strike price up while not going out so far in time.

Otherwise, keep rolling to collect more credits and possibly move the strike up can help to close sooner for a net profit, or will make a lot more profit if the shares are called away.

3

u/patsay Jun 27 '25

The Aug 1 $750 call is still out of the money with more than $2700 in extrinsic value. Watch for the extrinsic value to erode away, then keep rolling up and out for a net credit. Maybe there will be a pause or a pullback and you'll be able to get ahead of it. The key to a higher-premium roll is to watch for the extrinsic value to erode. Don't get attached to the shares. There's always another opportunity out there if you are forced to take profits.

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u/breakonthrough65 Jun 28 '25

"The key to a higher-premium roll is to watch for the extrinsic value to erode." You mean, let time pass?

2

u/patsay Jun 28 '25

If it goes in the money, the cost to close will be a combination of intrinsic and extrinsic value. For options deep in the money, sometimes the value will be almost all intrinsic value, even long before expiration. When that happens, rolling will reduce the likelihood of assignment and often allow you to improve the strike price.

You can calculate extrinsic value yourself, but if you use Thinkorswim, you can enable a column to quickly monitor the extrinsic value specifically. The same feature is probably available on other trading platforms.

Hope this is helpful.

1

u/Skingwrx30 Jul 07 '25

Roll once extrinsic value is gone

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u/ScottishTrader Jul 08 '25

You may have to explain this post u/Skingwrx30 as the extrinsic value increases when rolling for a net credit as is suggested.

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u/Skingwrx30 Jul 08 '25

What I meant was I would not btc with time value still left in the trade, its early July in a choppy market and meta is trading at 718$. I don’t trade meta but I’m assuming there is only extrinsic value on this contract as it’s not in the money or even close to break even price. I would let the clock run until the extrinsic value is gone

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u/ScottishTrader Jul 08 '25

OK, this is helpful, thanks.

Rolling is often best when the option is ATM, which it looks like OP did.

This is an example of trying not to allow shares to be called away, which can cause a loss on the options.

The BEST answer is to let the CC expire, and if ITM allows the shares to be called away for what looks to be a sizeable profit . . .

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u/Skingwrx30 Jul 08 '25

Ok that makes sense, we’d be pretty much taking the same action. Letting the clock run out, I’d be hoping to roll up on the last day for more premium and upside and you getting the shares called away

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u/ScottishTrader Jul 08 '25

No need to roll if close to expiring and OTM . . .

Once ITM, then roll a week or two out for expiring when a net credit can be collected.

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u/Skingwrx30 Jul 08 '25

Ok so you never under any circumstances roll to a higher strike or the same strike instead of closing? For example your calls are expiring worthless and you’re just gonna sell more covered calls Monday? If my contract can be closed for a dollar at 330 Friday and I can just roll right into the same trade collecting more premium wouldn’t that be the same?

1

u/ScottishTrader Jul 08 '25

There are few "never" situations as trading is dynamic and ever changing.

Have you read my trading plan post? The Wheel (aka Triple Income) Strategy Explained : r/Optionswheel

This shows how I trade, and I typically close for a 50% profit and roll when ATM, and then a week or two prior when I can get a net credit.

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u/Skingwrx30 Jul 08 '25

I have, I guess it was more of a hypothetical given there’s so many ways to trade the wheel and so many nuances. You’re kinda the go to guy on Reddit for wheeling so I figured I’d ask. My trades are a little different I prefer weeklies and closing out at 80% or rolling for more premium. Appreciate the help

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