The Wheel Options Trading Strategy - 29 Things You MUST Know for 2022
Вставка
- Опубліковано 5 сер 2024
- The 5 Most Frequently Asked Options Trading Questions: Answered!
First time here? Watch this video: go.rockwelltrading.com/StartHere
The Wheel Strategy: 0:13
The Basics: 2:12
Picking The Right Stocks: 15:48
Selling Calls After Getting Assigned: 25:14
What To Do When A Trade Is In Trouble: 34:35
Check out our recent article on Wheel Strategy Tips in 2022 you need to know: www.rockwelltrading.com/artic...
To get the transcript and MP3, go to: www.rockwelltrading.com/coffe...
Recommended Links & Videos:
The "Wheel" Strategy Explained: bit.ly/3ePN4qT
How To Fly Rescue Missions: www.youtube.com/watch?v=OlTD9...
Wheel Book: www.rockwelltrading.com/the-w...
Trading with Margin: www.youtube.com/watch?v=UHy84...
My Trading Routine: go.rockwelltrading.com/my-tra...
#StockMarket #OptionsTrading #TheWheelStrategy
In this video, I answer 5 of the most frequently asked options trading questions, including:
- ARE OPTIONS BETTER THAN STOCKS?
* For me, I say yes.
1) You need less capital than when trading stocks.
Using AAPL as an example, if you wanted to buy 100 shares of stock currently trading at $122, that would cost you $12,200.
If you wanted to buy a call option for AAPL, it would cost between $3.05-$3.10. So to control 100 shares of AAPL, it would only cost $305-$310.
2) You can't lose that much money. 100 shares of stock cost $12,200 and if say, the stock drops from $122 to $110, that's a $12 drop X 100 shares = $1,200.
If you are trading Options, the MAXIMUM loss is the money that you paid for it ($310)
3) When you're trading stocks, you must be right about the direction. When trading options, you can make money even if you're wrong.
- ARE OPTIONS RISKIER THAN STOCKS?
* For me, the answer is NO when used correctly. You would lose less money trading options than trading stocks.
- CAN OPTIONS GO NEGATIVE?
* NO. If you're BUYING options. Risk is limited to the premium you paid. But...
YES, if you're SELLING options. When selling options, your loss can be as much as the price of the stock can drop. You must have a trading strategy/plan.
- CAN OPTIONS BE EXERCISED EARLY?
* In theory, YES. An options buyer can exercise this option at any time.
Practically, NO. You would make more money selling the option instead of exercising it.
- WHEN DO OPTIONS GET ASSIGNED?
* Expiration date of an option is always on a Friday. Usually, the broker automatically exercises ITM options, but the buyer of an option has until 5:30 pm EST to inform the broker if they don't want the shares. So the usual settlement date is that Saturday.
- WHY OPTIONS ARE DANGEROUS?
* It can be dangerous, which is why you need these 3 things:
1) You MUST have a strategy.
2) You MUST have tools (PowerX Optimizer)
3) You MUST have the right mindset.
* Focus on SRC Profits
================================================================================
✅ First, subscribe to my channel here so you never miss a new video: bit.ly/3aLKLDz
📺 Watch My Daily Trading Routine that takes me less than 15 minutes a day: go.rockwelltrading.com/my-tra...
📕Get a FREE Hardback Copy Of My New Book “The Wheel Options Trading Strategy”: go.rockwelltrading.com/the-wh...
💻 Need a broker? We prefer trading using Tradier! Sign up here: go.rockwelltrading.com/tradie...
📈 TradingView is my favorite charting platform. I use the Pro Version: go.rockwelltrading.com/tradin...
================================================================================
tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with Rockwell Trading Services, LLC whereby tastyworks pays compensation to Rockwell Trading Services, LLC to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Rockwell Trading Services, LLC by tastyworks and/or any of its affiliated companies. Neither tastyworks nor any of its affiliated companies is responsible for the privacy practices of Rockwell Trading Services, LLC or this website. tastyworks does not warrant the accuracy or content of the products or services offered by Rockwell Trading Services, LLC or this website. Rockwell Trading Services, LLC is independent and is not an affiliate of tastyworks.
Which do you prefer, trading stocks, trading options, or both? Let me know why in the comments.
Recommended Links & Videos:
Options Trading 101: bit.ly/2V7Nf9T
3 Reasons You’d Lose Money Trading The Wheel Strategy: ua-cam.com/video/0KfJNZFqfE8/v-deo.html
Trading with Margin: ua-cam.com/video/UHy84SOGl4Y/v-deo.html
How to manage a trade that's in trouble (TQQQ): ua-cam.com/video/G6tPKaz03Qo/v-deo.html
What Is Delta In Options? ua-cam.com/video/oQqsTOl6Iyg/v-deo.html
Markus' Trading Office: www.rockwelltrading.com/office
I am an equity trader in the Indian market. I'm more interested in options, and I've tried them several times and lost a lot of money, so I'm a little hesitant right now. But I'm not going to quit until I get it. So far, I'm focusing on strategy and playing with a tiny amount of money.
Both, but Iike the wheel strategy too.
Just started watching you this week! Love your stuff!
Thank you, Nancy! Are you already trading?
I've watched a ton of your videos. Many many of them are really good. This one is great!! Thanks, Markus!
😊 You are welcome! I am glad that this helps!
Fantastic video. I already had come to the conclusion before I found your posts that the wheel is the strategy for me and this Q&A is extremely helpful. Thx! You have a great way of explaining
Awesome! Thank you for watching! :)
You’re so fun to watch Mark! Very good teacher and just an awesome guy. Thanks for making the video
You are welcome! :) We appreciate your kind feedback.
I agree, it’s like watching Barry Gibb with a german accent talking about options 😂 (it’s a compliment, coming from a bee gees fan).
First timer here. Let’s get started sir.
Awesome! :)
you've got excellent teaching skills, thank you very much for your videos!!!
😊 You are welcome! I am glad that this helps!
Thank you, I am learning a lot from you.
Awesome! Thank you for watching! :)
Great video Marcus! I had many of these questions, now on to the Rescue Mission video!
Awesome! Thank you for watching! :)
I like the way you teach, very well explained and so easy to understand.
Thank you! I really appreciate your feedback. 😉
thanks, really appreciate all the information good vids boss!
You are welcome! ;)
Hi Markus! I am writing from Brazil. GREAT VIDEO. I am going to get THE WHEEL started.
Awesome! Thank you for watching! :)
E aí , como tá se saindo ?
Very helpful. Thank you.
The honesty at the end, awesome.
Awesome! Thank you for watching! :)
Excellent Tutorial video. On Questionn No.17, you have mentioned "usually closer to the strike price" , it is to be corrected as, " strike price of call sold is closer to the current price of the stock"
Great video Markus. Very helpful.Thanks.🙂
Thank you for watching! I am glad that this helps.
Great video, thanks for the tips!
You are welcome! ;)
Like when you do these Q & A's, it is a great quiz. Everyone doing the wheel should be able to answer these questions.
Awesome idea! Thank you for watching! :)
Amazing content! Thank you Markus!
Thank you, Matt!
Great info! Thanks Markus!
😊 You are welcome! I am glad that this helps!
Another great learning lesson, thank you
😊 You are welcome! I am glad that this helps!
Nice video im doing the wheel with a small cash account avg about 700 a month in premiums. I like the way you present the data.
Hi Jay DKB, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
I am first time watching your channel. I am not a trader but lean more contrarian/value stocks that pay a good divden that I plan on owning long term.I do use the wheel technique alot just enjoying all that divden an premium cashflow.Love the video thanks for what you do.
Awesome! We appreciate your feedback! ;)
Great video Markus! I prefer options trading especially the Wheel.
Awesome! Thank you for watching! :)
Great video.
Thanks for being so honest about starting capital.
You are welcome! Does this video helps?
@@rockwelltradingservices .
If I sell a covered call with a strike price of say $35.00
and the stock price rises ABOVE $35.00 then falls below $35.00 before the expiration date, can the buyer still exercise his option at the lower price?
Thanks again
Just started my wheel account today! Wish I saw this video first. Got a good mix of high IV and safe plays.
Awesome! Thank you for watching! :)
@warren Z how has it been going for you thinking about starting up
Thank you Markus!
😊 You are welcome! I am glad that this helps!
Hi, Just wondering what's the performance during last 12 months? Does this strategy work in a bear market? Thanks.
HI Markus, Im New to you channel, love it
Awesome! I am glad that you love it.
WHAT A GIVER. TREMENDOUS THANKS. I AM A BIG NOTE TAKER TOO. I (WE) REALLY APPRECIATE YOU. CONTINUAL HEALTH & WEALTH TO YOU AND YOURS.
Thank you! 😊
Nice premonition on Peloton!
Hey Markus, big fan of your channel, and going back to re-watch some of your videos to see if I can learn anything more. I run the wheel on SPY/QQQ/IWM, and with the recent market drops, my cost basis is very high above the current price. I am still selling weekly covered calls that are very far below my cost basis, in order to collect premium. I have no desire to sell these shares, and I plan to roll up and out if the markets start to recover. Am I crazy to think that I can roll up and out to avoid selling my shares? So far if my call goes ITM I can roll up and out for a small credit.
Hi Markus, great content. What are your thoughts on using the wheel around a stocks ex dividend to not only collect premiums on the put and call but get a dividend too? Maybe you already have a video on this? Thanks
Great job Markus. Learning a lot. Maybe too much. Head exploding! LOL
Take it one day at a time. ;) By the way, if you want to reach out to Markus and the Rockwell Trading team you may connect with us on these social channels:
Facebook- facebook.com/markusheitkoetter
Instagram- instagram.com/markusheitkoetter_/
What is your criteria to set the put price when you sell? do you search for the support and ad a standard deviation? or do you just pick a delta ITM or do you just pick the biggest premium ATM?
yes questions are very useful
Awesome! 😉
I have watched the whole video.
The main concern of the strategy is that the stock will fall significantly and you will have to wait a long time until it recovers.
This is what I do:
1. I do not sell puts to buy the stock ==> I buy the stcok and sell call at the money (Usually 3 days to 1 week exp of the call) --> This is the covered call position.
2. I buy a put further out (about 6 months out).
This is offsetting the delta to approximately zero.
Under the assumption that the option is sold for at least 1$ and the put was bought for about 7$ - 9$ that means that you sell you call at least 4 times a month and in 2 months (Worst case) you recover your total put cost.
Ofcourse the put does not go to zero in 2 months, maby it gows down to half (400$ if the stocks shoot up), that means that the strategy has at least 1400$ gains premium.
On the other hand if the stock falls down, I have the put that offset the losses.
This is basically a delta neutral strategy.
What do you think about that strategy?
Hi markus, with portfolio margin how much should a person use?
Thank you for this video! I actually starting to use this strategy when the market is down. I find it less stressful then selling covered calls actually. Looking forward to another video that teach us how to buy option with the right strike price and expiration date in the future. 😉
Awesome! Thank you for watching! :)
Thank you Markus.
You are welcome! ;) What have you learned so far?
@@rockwelltradingservices I am watching selling put option, wheel strategy, selling covered call, and poor man's covered call. your explanation is very underestandable. I have been learning a lot since I found your channel. Markus , is there any way to access to those word file that you answering questions?
What word file are you referring to?
@@rockwelltradingservices QA word file. The questions and the answers that you give in this video and also other videos.
If your selling naked puts on margin and at expiration the strike price is met and it’s in the money... when you are assigned the shares is it all in margin or will the brokerage make you pay a percentage in cash?
Hi! In another video you said don’t sell naked puts and that’s CSP are better for the wheel. But in this video you use margin to have more buying power. I’m gonna confused, which is it?
I have seen several examples of your wheel strategy and have learned a lot. Do you have any videos of examples of your power X strategy. Thank you
Hi! You can check out my video here powerxoptimizer.com/
wow this is my first time here!
Awesome! Please subscribe to get notified every time I have new videos or go live!
Hi Markus. Big fan of your channel. I initially made a 28% net profit with put spreads on my first 2 cycles but had a big loss on my 08/20 expiration. I think the wheel and PMCC will be a more profitable and less risky strategy going forward but will take a longer time to see the account grow. Your thoughts?
Agree. I definitely prefer trading The Wheel of PMCC over credits or debit spreads.
How do you calculate annualized return, in a weekly option?
yes
Awesome! :)
What do you think about ARKK ETF?
I have two rules that never fail me. Rule number one: never lose money. Rule number two: never forget rule number one.
Cool!
Watching first time
Awesome!
Thanks again for another great video! I'm a little confused since in this video he says he trades growth stocks but in another video he talks about avoiding growth stocks. Is it that he trades growth stocks that aren't in a "crazy" growth mode?
You have to check the date of the video you are watching. I do change my strategy according to the market condition.
Can you address wash sale rule when using the wheel strategy
regarding the time frame of going out 1 to 2 weeks out to sell premium, dont you consider the gamma risk on less than 15 days out, where 20 to 30 days out the gamma risk is drastically reduced, what are your thoughts on gamma risk on very short dated strikes? thank you in advanced for your time and reply, and as always amazing content, much appreciate all your videos
Hi Alex, for me, the most important number is the "Premium Per Day" (PPD) and based on this, the annualized ROI. I don't consider gamma in my choice of stocks, strike prices and expirations.
Hi Markus,
A question that came up.
Your account trades 500k in buying power which means if all get assigned no buying power is left.
Isnt this a risk regarding margin call as the margin would drop accordingly to risk rating of stock being assigned?
Markus has mentioned in other videos, his goal is not to get assigned across all the trades, the more aggressive you sell the puts, the more likely it is to get assigned. In any scenario, what you have described is definitely a possibility.
I am running the same strategy but I am not using margin even though it is available. I will only use margin to help me get out of trades which have gone against me.
Question 20 (AAPL) 32:00 mark. I do not understand why you would not sell $133 calls for March 19 (9 DTE) for 14 cents. You have 800 shares so that is $112. You say you would be tying up the capital for a week. How are you tying up capital when you already own the stock? In my mind, might as well bring in some premium while you are treading water underneath your cost.
I've looked into different trading strategies. It seems to me like the wheel is one of the best strategies to use. If you are using a stock that you like and don't mind owning 100 shares you really can't lose. Please let me know if I'm wrong. I believe if you like the stock you use you only have a couple of ways it will turn out. You are always earning you credit just either own 100 shares while you're doing it or you don't.
That's correct. And that's why I'm loving this strategy! 😀👍
Why do you buy to close at 90%, instead of 100%?. Does the option have to expire worthless to keep the 100% premium? Thanks.
wheeling and dealing
Awesome!
Since you prefer having your stocks put on you or called away, do you tend to select out of the money strikes that are close to the strike price or do you select a strike price with a ~.3 delta as I hear most folks recommend?
I'm using "The Wheel Calculator" to find the best options to sell. Sometimes it's 0.3 delta, sometimes 0.4 and sometimes 0.1. It really depends on the premium. The Premium Per Day (PPD) is more important than DELTA. Does this help? 👍
@@rockwelltradingservices Yes, thank you!
😊 You are welcome! I am glad that this helps!
Hi... Can we use the powerX strategy for stock markets other than US market?
Hi Deepali Patil, as of now it can only be used for US Stock Market.
when you sell a put at eg. at $12 strike price and the current price reaches the strike price @$12 are you automatically assigned?
In theory it is possible but it doesn't happen often since there's still some time value in the option. So the option buyer would make more money if he or she just sold the option instead of exercising it. Making sense?
16) Pretty sure you can sell a CC at a lower strike then your assigned put price as long as the premium you receive covers the difference... am i missing something? Main question then is, why would you?
Yes, that's correct. You can sell calls at your "break-even point" which is below the assigned strike price. But then you would give back all the premium that you earned by selling puts. Does this help?
Hi, Mr. Heitkoetter. I would like to get a copy of the notes. I liked your video.
Hi Armando. I am glad that you like this video. Here is the transcript for this www.rockwelltrading.com/coffee-with-markus/wheel-options-strategy-29-things-you-must-know/ I hope this helps. ;)
Hello Mr Markus, I bought you PowerX strategy book, upon reading it, you did not inidcate any timeframe the you are using the strategy on. I am sure time frame matters for the strategy to work well. Also how can I get access to the screen software?
I'm trading the PowerX Strategy on a DAILY chart. Does this help?
My understanding with options is you need to have a sizable account otherwise brokers won't allow you to do it what is the minimum amount to have enough options to come
That is true.
I am watching for the first time.
Awesome! What do you like about the video?
@@rockwelltradingservices simplicity
That is my aim, to simplify trading. ;)
Hi Mark. Thanks for the video on wheel strategy. Was wondering about your AAPL trade that got stuck. Had you used a deep in the money Long call option instead of selling puts (and subsequently getting assigned at 130, and stock moving down), wouldn't you have been able to continue to sell covered calls against it? Am I missing anything. The strategy what people refer to as poor man's covered call.
If I have time to watch during the day, I prefer stocks. If time is limited, placing an order to sell a contract takes very little time.
Awesome! 😊 Thank you for watching and sharing your thoughts here.
Great content. Thankyou Jesus Christ.
Thank you for watching! 😊
would you take a loan to start trading? Thanks
Hello Julian, great question! I personally would not take out a loan to start trading. If you're an experienced trader with multiple strategies under your belt, the situation may be different. But when starting trading, I recommend you trade with money you can afford to lose :)
Do you keep your short puts open during earnings period? What do you suggest?
Great question. I don't like to sell puts that expire AFTER earnings. I personally wait until AFTER earnings before selling puts again. Does this help?
@@rockwelltradingservices Yes this does help. Unfortunately I have sold puts that expire 19th nov and also dec. Do you suggest to close those before earnings season that happens around 10th of november. Or it depends on the stock?
Well, EVERY stock can react very heavily to earnings. If you are currently up or slightly down on the position, I would rather close it. The good news: You can wait a few more days and have time decay working in your favor. No need to close them now. I'd say try to close them by Nov 5th to avoid a volatility rush. Does this help?
If you dont care about vol and open %, how then do you roll when you have to? Or do you jst take assignment?
When selling puts, I just take assignment and don't worry about rolling. When selling calls, I only roll if I can get at least 60% annualized ROI with the credit of the roll. Does this help?
@@rockwelltradingservices yes, thx... what is your reason? do get better premiums on selling covered calls instead of rolling a cash secured put? thanks in advance
Correct. When selling puts, I'm looking for at least 30% annualized ROI. When rolling Calls, I am shooting for at least 60%, so that's a much better ROI. Making sense?
@@rockwelltradingservices yup...made sense. Just wanted to see the reasoning behind the strategy thank you
Awesome! You are welcome! See you in the next video. 😉
How do you feel about spy as a cash put?
Hi Gilbert, SPY usually has very low implied volatility (IV), i.e. the premiums are very small. That's why I prefer trading individual stocks. I like to see an IV of 40% or higher. Does this help?
@@rockwelltradingservices My 1 SPY Put shows a price change of +115% and a day change of -$115%.
My 1 VTWO Call shows a price change of -18% and day change of +18%.
Why is the Put +positive and the Call -negative?
Hi Gilbert, it's really difficult to answer this question without seeing your platform.
In a nutshell, a CALL loses money when the market goes down and a PUT is making money during a down move.
I don't know what exactly you're looking at, so it's difficult to answer your question. Hope this helps a little bit.
Why do you like to close your positions rather than let them expire?
Great question, and I JUST published a video that explain why. Take a look: ua-cam.com/video/dqPTUYwVSAA/v-deo.html
2nd time
MARKUS/MARK, PLEASE SPEAK TO STOP MARKET LOSS AS I DO NOT BELIEVE YOU CAN HAVE A SML ON POSITIONS THAT YOUR ARE WRITING COVERED CALLS ON. PLEASE CLARIFY/CONFIRM.
That's correct: You can not place a stop loss and sell the stock. That would leave you with a naked call which is very dangerous.
Stocks help reduce the volatility of options. I think no more than a 50/50 split. A put spread helps protect you from downside risk after assignment.
Thank you for watching! :)
first time
Awesome! Welcome to my channel!
Something I still don't understand. I get that you have a 30% annualized return target. But what's the risk if you sell a covered call anyway where you can't get 30%? You're tying up those shares but why is that "bad"?
I prefer trading options more than stocks. It's quicker to earn gains in my opinion than holding stocks long.
Awesome! Thank you for watching! :)
Do not sell cash secured put on $5 company…too risky. Only sell puts on companies that are fundamentally strong and you do not mind owning them. Or you might end up holding the shares of a company that will never recover!
It is indeed a prudent strategy to avoid selling cash-secured puts on companies with low stock prices, such as those trading at $5 or below. These stocks can be highly volatile and risky, increasing the likelihood of significant losses. Instead, it is recommended to focus on selling puts on companies with strong fundamentals that you believe in and wouldn't mind owning if assigned the shares. This approach helps mitigate the risk of holding shares in a company that may struggle to recover. By selecting fundamentally sound companies, you can align your trading strategy with long-term investment goals and reduce the potential downside risk.
$500?
Markus: NO!
haha
Thank you for watching! 😉
Markus, please make second good translation spanish channel
I will take note of that.
I prefer options
Awesome! Thank you for watching! :)
Who out there has 500k to invest that doesnt know this? The example just seems... out of reach @12:00
Lol so many weed stocks in your “conservative” tab. Buyer beware
Hi Andrew, you are watching an old video. This was posted last year, March 2021.
Get a silent keyboard!
You are watching a video from 2021. ;) Markus has already moved to a better studio. -Admin Cristy
@@rockwelltradingservices thanks and I love the videos
sorry I’m so anal about the keyboard
No worries! ;)
Couldn’t care less about the company or the story. Who cares as long as you are making good premiums. I’m not going to own any of them long term anyway. I absolutely hate these sentiments when it comes to options. It literally has no place in my trading strategy.
Thank you for sharing your thoughts about that.
You are too nice. I love your videos and I think that you add a ridiculous amount of value to novice option traders. I just hate the “only option stocks you would like to own long-term”. Literally the goal of the wheel is to not own Stocks long-term. That statement is so overused and so untrue that it now makes me irrationally angry every time I see a true options trader use it.
Just FYI, I appreciate The effort and information that you put into these videos.
This is insane. Using 200% margin on your cash? Prescription for bankruptcy.