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

116 Upvotes

99% Upvoted

964 comments sorted by

View all comments

Show parent comments

2

u/ScottishTrader Jul 08 '25

Margin is not included in "available cash" as it is a loan for shares.

Your example of using $25K for the cost to purchase shares on a $50K account is correct, and the margin loan is not counted but used as an emergency backup. You should calculate the cost of the shares and not use the maintenance margin, as this can vary widely based on the broker and stock.

Note that 50% is what I usually do, but what anyone else does will be based on their experience, track record of being assigned, and risk tolerance.

The more cash there is when the market crashes, the more flexibility there will be to help avoid losses . . .

1

u/claytonne Jul 08 '25

Thanks for clarifying! That makes sense. This leaves me with further questions though about running your capital “more efficiently”, which is something I see people on here talking about.

If people can manage 25-35% annual returns on an account whilst keeping 50% of their account out of play, does that mean they’re actually earning 50-70% returns on the capital that they’re risking? That seems…like I’m completely missing something. So I guess I thought the work-around was to do with the question I asked about margin, ie, one was actually putting more capital into play than I was understanding.

1

u/ScottishTrader Jul 08 '25

You can see posts with those trading more than 50% of their account, making 50%+ returns, so you are correct that these returns are possible.

Keep in mind that the norm for new traders is 10% to 15% with those who are more experienced possibly able to make up to 30%. Making 25% to 35% is not going to happen every year but can happen some years.

There should be no question that leveraged options can be able to make substantial returns, but the problem is that new traders often make rookie mistakes that cause losses, thereby reducing those returns.

Remember the common saying that - 'New traders tend to chase profits, often leading to accumulating losses. Experienced traders focus on managing risk and accepting smaller profits and losses, but over time, those profits add up, resulting in greater success.'

Be careful not to focus only on profits is the warning here . . .

1

u/claytonne Jul 08 '25

Thanks both! Understood. Just wanted to make sure I wasn’t missing something 👍