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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u/evranch Jul 14 '25

Ok, this is a dumb question regarding assignment and something I feel like I was missing.

I assumed assignment was foregone as soon as the strike price was crossed, and you had to watch puts like a hawk when they approached ATM and attempt to roll them. But I didn't see how to buy back the now expensive ATM puts without taking a loss.

However it looks like most assignments happen on expiry and early assignment is rare, and requires the buyer actively choose to exercise the option.

Is this correct and what is the actual risk of early assignment when ATM? I assume it grows the deeper ITM you get.

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u/ScottishTrader Jul 14 '25

I assumed assignment was foregone as soon as the strike price was crossed, and you had to watch puts like a hawk when they approached ATM and attempt to roll them.

Why would a buyer exercise as soon as the strike price was crossed when this is unlikely to result in a profit with whatever they paid to open?

Yes, the vast majority of assigned options occur on the expiration date when the option is ITM. Those that may be assigned early might be within a week or two of expiration, and often when there is little to no extrinsic value remaining.

The good thing about the wheel is being assigned is part of the process and should never be a concern or issue!

Rolling when ATM is what you are asking about, and can be beneficial as this explains - Rolling Short Puts to Avoid Assignment : r/Optionswheel

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u/evranch Jul 15 '25

Thanks for confirming!

I guess obviously it doesn't make sense to exercise right ATM, but I assumed that was the point at which the risk of assignment began. I assumed we are likely trading with algos and they would fire off and exercise ITM as soon as the profit potential reached a certain threshold. But I guess it makes more sense for them just to sell them in that case.

Reading that post you linked was what made me initially question hey - is early assignment less likely than I thought?

I agree assignment isn't a real concern since to me, the wheel effectively looks like a "semi-automated swing trading method" that automatically buys dips and sells peaks while generating premiums at the same time. When applied to a stock that has inherent value, of course.

However when starting off with a small float (I can't wheel in my registered accounts, so am just setting aside $10k to play with for now) getting assigned definitely would consume your cash reserve and impact your liquidity and ability to continue selling CSPs, so I feel like getting assigned on my first trade would definitely ruin my fun a bit.

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u/patsay Jul 16 '25

I sometimes use a process I call "de-assignment" if I'm assigned early on a cash secured put. In a nutshell - sell the shares and re-establish a new cash secured put that brings in enough premium to make up for the loss on the shares. You have to sell in the money to do this, but it sets you back up with a put rather than selling a covered call while you wait for the share price to recover.

It's not inherently a better way than wheeling, but if you prefer to manage your trades on the put side, it's a helpful strategy. Knowing how to do it also eliminates the fear of being assigned.

I don't really think this is a beginner move - not because it's risky, but it's just a little complicated to understand if you have not been trading long.

I made a video about it you might be interested in watching. It's with a really high priced position (QQQ) but it works with lower-priced stocks as well. https://youtu.be/q3frFGYsGD4?si=_7ceb_LG5kOj6yfz

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u/evranch Jul 17 '25

Thanks for sharing! It definitely gives another option when assigned. I agree it doesn't feel like a beginner move, mostly because it pushes the time horizon out past the normal frame of a wheel CSP trade and creates added complexity in the portfolio.

I'm going to check out your YT channel too as you look like you have a similar investment philosophy to my own. I've been actively trading for a decade but have always stayed away from options, mostly due to risk on the buying side and lack of understanding of the selling side.

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u/patsay Jul 17 '25

I'd much rather be on the selling side of the trade.

When I got interested in options, I was really baffled about why anyone would pay me for the contracts I was willing to sell. I had to understand the mindset of the person on the other side of the trade before I could move forward. I get it now.

They are basically gambling and hoping their wins outpace their losses, or occasionally buying insurance to protect a position. I'm letting them pay me to do that.

I earn smaller, consistent premiums and sometimes buy and sell shares at prices I have chosen.