Shyon
07-04
Great lesson for everyone on the option wheel strategy.

The options wheel strategy is an income producing strategy involving selling put options, potentially owning stock, and selling covered calls until the shares are called away or the position is closed. The wheel is an increasingly popular strategy for investors that want to generate income before and possibly during stock ownership.

The wheel's primary objective is not to own stock. The strategy's goal is to consistently take in credit via selling short put options. However, selling short put options prior to owning stock reduces the position’s cost basis throughout its duration.

The wheel strategy can be thought of as an active approach to passive investing that allows investors to generate consistent income. It is perfect for stock investors looking for a simple transition to options trading.

The options wheel strategy consists of two main components as shown in attached. @Tiger_comments @MillionaireTiger @CaptainTiger

Have You Ever Sold a Stock as Soon as it Broke Even?
Some investors say they could withstand a 50% loss but couldn’t hold on to a 50% gain. Most steadfast Tesla holders likely didn’t sell at the low point, but they might have sold after Tesla rose to broke even. ---------------- Have you ever sold a stock as soon as it broke even? Endure 50% loss or hold on to 50% gain? Which is harder for you?
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • BirdieO
    07-05
    BirdieO
    Great breakdown of the options wheel strategy
    • Shyon: 
      My pleasure, thanks! 👍🏻
  • Shyon
    07-04
    Shyon
    @TigerGPT what is an option wheel strategy?
    • TigerGPTReplyShyon: 

      You're welcome! I'm glad you found the summary helpful. If you have any more questions or need further assistance, feel free to ask. Happy investing!

    • ShyonReplyTigerGPT: 
      Good summary for my readers! thanks
    • TigerGPT: 

      The options wheel strategy is an income-producing strategy that involves selling put options, potentially owning stock, and selling covered calls until the shares are called away or the position is closed. It is a popular strategy for investors who want to generate income before and possibly during stock ownership.

      The primary objective of the options wheel strategy is not to own stock but to consistently generate income by selling short put options. By selling short put options before owning stock, the strategy reduces the position's cost basis throughout its duration.

      The options wheel strategy can be seen as an active approach to passive investing, allowing investors to generate consistent income. It is particularly suitable for stock investors who are looking for a simple transition to options trading.

      The options wheel strategy consists of two main components:

      Selling Put Options: The strategy begins by selling put options on a stock that the investor is willing to own. By selling put options, the investor collects a premium and potentially acquires the stock at a lower price if the options are exercised.  

      Selling Covered Calls: If the investor is assigned the stock through the put options, they can then sell covered calls on the stock. This involves selling call options on the stock that they already own. By selling covered calls, the investor collects additional premium income.  

      It's important to note that options trading involves risks, and the options wheel strategy is no exception. Investors should carefully consider their risk tolerance and conduct thorough analysis before implementing this strategy.

      Please note that the attached image is for illustrative purposes only and may not represent the exact details of the options wheel strategy. It is always recommended to consult with a financial advisor or conduct further research before implementing any investment strategy.

      Disclaimer: The information provided here is for reference purposes only and does not constitute investment advice. Trading options involves risks, and individuals should carefully consider their financial situation and risk tolerance before engaging in options trading.

  • NicoleBryce
    07-05
    NicoleBryce
    Informative
    • Shyon: 
      Great that you find it useful
  • AuntieAaA
    07-05
    AuntieAaA
    GOOD
    • Shyon: 
      [Cool] [Cool] [Cool]
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