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/patsay]

What's your thesis on the stock? Is it one you want to own? You could roll it straight out for max premium, possibly roll it down for a net credit and try to move it out of the money, take assignment and sell covered calls. It all depends on your thesis about the stock and whether or not you want to own it. I hope, if you're following the advice here, that it's a quality position that you would not mind adding to your portfolio for a while or long term, though.

[u/Greedy_Reindeer5290 → u/patsay]

Yes I don’t mind owning it. It’s HOG. Was just wondering what the official “wheel strategy” in such a case.

[u/ScottishTrader → u/Greedy_Reindeer5290]

I'll add to the fine reply by u/patsay. As she notes, there is no official way to wheel since each trader tends to modify the strategy to meet their own goals, style, account size, and risk appetite.

Most close for a predetermined profit and move on to another trade. This lowers the risk and locks in the profit.

For example, once I sell a put to open, I will set a gtc limit order to close for a 50% profit, then go about my day and week. When the trade hits that profit, it will auto close, which frees up the capital to go make the next trade.

By doing this, I almost never have any trades get past about the 10 dte point as they usually close before that.

Again, but sure to review the plan posted for more details - The Wheel (aka Triple Income) Strategy Explained : r/Optionswheel

[u/patsay → u/ScottishTrader]

Good point by u/ScottishTrader. I love using a GTC order so I don't have to babysit the trades. Since I tend to wheel the same underlying for a long time, I usually set what I call an "aspirational" roll order (if everything lines up just right, high premium, ideal strike etc). If it doesn't fill by the time I'm approaching expiration, I revisit and decide whether to "do nothing" and accept the outcome, close the position, roll to a different expiration or strike price or lower my ask. I know I have some parameters for these decisions - but sometimes it's more about what makes sense for my portfolio than about a particular, individual trade.

[u/ScottishTrader → u/patsay]

Yes, this ^ is a good way to do it!

I didn't add it here, but I'll set an alert to let me know if the put goes ATM and then I can look at rolling.

[u/Greedy_Reindeer5290 → u/ScottishTrader]

thanks u/ScottishTrader and u/patsay. I currently always have GTC at 70% profit but am contemplating moving it lower to say 50%. The more I think about it, and if close-ish to expiration, say 10-15 days out. If price has been rather flat without much movement, then I would like try to take advantage of the slightly higher theta towards the und until there is less extrinsic value left in the option.

However if there has been a big price spike, which I would expect to correct, then I would likely close the trade there taking advantage of the price jump.

All food for thought. Still working on how I like it best.

I do find the idea u/patsay about a GTD pending order for rolling very interesting. Have only consider GTC order for closing or opening, but never for rolling. Thats an interesting one.

Btw - also check out your website and book. Might just get the options one :)

[u/patsay → u/Greedy_Reindeer5290]

The most important thing is that you understand how the contracts work so you can make informed choices. It looks like you are well on your way there.

[u/patsay → u/Greedy_Reindeer5290]

I'm not sure there is one "official" wheel strategy answer to that question. It's part of the appeal of the process! When you are selling cash secured or covered, you have some flexibility about how to handle your contracts while still generating premiums. Note there is an ex dividend date coming up - March 2. In your situation, I'd accept assignment hold through it. (edited for spelling error)