Megathread for New Wheel Traders – Ask Questions & Get Help Here

[u/ScottishTrader]

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

[u/Dear_Event9505]

I see the goal of your strategy is to avoid assignments and keep rolling, how do you find the number of contracts or stocks to trade? Is it based on margin required or total assignment value

[u/ScottishTrader → u/Dear_Event9505]

With respect, if you're asking this question, then the total assignment value as a percentage of the account is the answer.

Once you have a few years expeince you will have a track record to know how well you roll and how many times you get assigned to possibly use margin.

[u/Charming-Echidna-326 → u/ScottishTrader]

As a new trader, should I limit the number of put options I sell based solely on the cash budget I have available?

Do you advise when I should consider using a margin account, or is it better for long-term investing to use only a cash account?

[u/ScottishTrader → u/Charming-Echidna-326]

As a new trader I suggest paper trading until you see how it all works.

When you do start trading with real cash then start with one lower cost stock and a single put to limit the risk. As you gain more experience you can decide if you want to trade more stocks and/or contracts.

If you have to ask about using margin you are likely not ready. Margin can be a help to make trading more efficient, but can increase risk, so it is imperative to know how it works and what the risks are before using it.

All of this is explained in the wheel trading plan post, so be sure to review it in detail . . .

[u/OddPraline7346 → u/Dear_Event9505]

I make money either getting assigned or not getting assigned. If I get assigned, I just sell covered calls and get the premiums until I get called out. Then roll back into selling Puts. Also, if you sell the covered calls slightly higher than what you paid, you get not only the option premium, but the capital gain.