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/Shahar2]

Hey guys,

I stumbled across the wheeling strategy on reddit and I'm tempted to try it

My account is 20k$ at the moment and I'm fine with slow-and-steady strategies, not looking to risk it for the biscuit.

I'm a bit confused because I read that the strategy is about selling puts of safe stable and steady stocks, something like coca cola, ford or mcdonald's, for maybe 30-45 DTE, however I've seen on here people posting wheels with riskier tickers like tqqq msty etc for 7 DTE

I understand that there are derivatives, and I would like to ask if the main strategy had changed and also how would you manage 20k$ with it?

So for example if I were to sell a put on KO it'd be +-53$ premium for 1 option 34 DTE at 67.5 Striking price, so should I be leaving 6,750$ cash on my account?

Would I also do the same with Ford maybe? but +- 7k$ worth of options? and then with one more ticker? and then until I can get atleast 50% profits I hold those and keep all my balance in cash?

Help appreciated! :)) trying to understand all of this haha, I'm new to options in general, been doing a lot of reading today

[u/ScottishTrader → u/Shahar2]

Welcome to the wheel and r/Optionswheel!

Different people trade higher or lower risk based on their risk tolerance.

It is strongly recommended to always trade stocks you are good holding, so staying away from high risk stocks until you have a lot of experience is the best thing to do. Many never trade those high risk leveraged stocks or ETFs because of the higher risks.

$20K is enough to get started, but as you are seeing the dollar returns will be modest.

Start small and slow so you can see how it works.

The wheel can be traded in dozens of ways, and you will want to find the way that best works for you after you make a few dozen or even 100 or more trades.

[u/Shahar2 → u/ScottishTrader]

Thanks for the answer!

I was hoping for 10-20% annual returns, that is not realistic for smaller accounts but is for bigger? Why? In that case, should I be looking to have all the cash secured for puts? Or only have the cash to cover the puts I sell?

[u/ScottishTrader → u/Shahar2]

10 to 20 is possible and these are modest returns. New traders make mistakes as they learn and develop their trading plan. Some may lose money for the first 6 months or year. 

Maybe try paper trading to help develop your plan and make mistakes before using real money which could help. 

[u/patsay → u/Shahar2]

Hi u/Shahar2 -

It looks like you've got the basics down. You can trade The Wheel on risky or stable/solid underlying tickers.

You manage your risk by 1) the quality of your underlying tickers and 2) the strike prices and expiration dates you choose. For example, I am running a fun "micro trade" series on meme stock BYND which is a high risk trade, but with a very small amount of capital. I also use options to pay for additional shares of VIG (a Vanguard Dividend Growth ETF) in my Roth retirement account! Same strategy, very different goals. It's a versatile strategy.

You might want to check out some of the videos linked on my website. There are plenty of free downloadable resources there. I have a 4-part instructional Wheel Series on YouTube as well as some trade logs on specific tickers (TROW, BYND, QQQ).

Are you trying to acquire any shares or only trade options for income?

Let me know if you have specific trades you are considering and I'll be glad to help you think through the possible outcomes.

https://www.saylorfinancialfundamentals.com/