To The Moon

$Gold Trust Ishares(IAU)$ 🥇 Part 1: My Gold Wheel Strategy — Selling Cash-Secured Puts and Covered Calls on Gold 🐶 My Options Puppy Approach to Gold 🐶 I have always liked the idea of using options not only to speculate, but also to generate income while waiting to own an asset at a price I am comfortable with. For gold, one of the instruments I can use for this strategy is the iShares Gold Trust, or IAU. Instead of simply buying IAU and waiting for the price to rise, I can use the Wheel Strategy to potentially collect option premium along the way. 💰 My basic idea is simple: sell a cash-secured put when I am willing to buy IAU, and if I eventually get assigned the shares, sell covered calls while I hold them. If the shares are called away, I can potentially start the process again by selling another cash-secured put. ⸻ 🥇 Step 1: IAU Was Trading Around $82 📈 In my example, IAU was trading around $82 when I looked at the options chain. Rather than buying 100 shares immediately at around $82, I decided that I was comfortable owning IAU at a lower effective price. 🎯 My target was the $80 strike price. The important thing about selling a cash-secured put is that I must be genuinely comfortable buying 100 shares at the strike price if the option is assigned. 💵 The $80 strike requires me to set aside approximately $8,000 for 100 shares. In exchange for accepting this obligation, I received an option premium of $0.59 per share. ⸻ 💰 Step 2: I Collected $59 in Premium 🤑 One options contract normally represents 100 shares. Therefore, selling the $80 put for $0.59 gives me: $0.59 × 100 = $59 premium 💡 This $59 is important because it immediately reduces my effective purchase price if I eventually get assigned the shares. 📉 My calculation becomes: $80.00 strike − $0.59 premium = $79.41 effective cost 🎯 So although the contractual strike price is $80, I can think of my effective entry price as approximately $79.41, before commissions and other transaction costs. ⸻ 🛡️ Step 3: Why I Call It a Cash-Secured Put 🔐 A cash-secured put means I have enough cash available to purchase the shares if assignment occurs. I am not simply selling a naked put and hoping everything goes up. 💵 In my example, I am prepared for approximately $8,000 of capital to be used if I am assigned 100 shares at $80. The $59 premium is additional income from taking on that obligation. 🐶 This is important for my Options Puppy philosophy: I don’t sell a put just because the premium looks attractive. I sell the put because I am willing to own the underlying asset. ⸻ 📊 Step 4: What Happens If IAU Stays Above $80? 😊 The first possible outcome is that IAU remains above the $80 strike price at expiration. 📈 If IAU stays above $80, the $80 put may expire worthless. I don’t get assigned the shares, and I keep the $59 premium. 💰 In this situation, I have generated income without purchasing the 100 shares. 🔄 I can then look for another opportunity to sell another cash-secured put, depending on the price of IAU, the option premium available, the market trend and whether I am still comfortable owning gold at the selected strike. ⸻ 📉 Step 5: What Happens If IAU Falls Below $80? 😅 The second possibility is that IAU falls below $80 and I am assigned 100 shares. 🎯 But this is not necessarily a disaster because assignment was already part of my plan. 💵 My contractual purchase price is $80, but because I collected $0.59 in premium, my effective cost becomes: $80 − $0.59 = $79.41 📌 If IAU falls to $78, for example, I would have an unrealized loss based on my $79.41 effective cost. But I entered the trade knowing that I was willing to own IAU around the $80 area. 🐶 This is the key difference between a planned wheel trade and randomly buying a falling asset: I already decided in advance what price I was comfortable paying. ⸻ 🔄 Step 6: This Is Where the Wheel Begins 🎡 Once I am assigned 100 shares, the strategy can move to the second stage of the Wheel: selling a covered call. 📞 A covered call means I own 100 shares of IAU and sell one call option against those shares. 💰 For example, if I own IAU after assignment and I believe the price can continue rising but I am also willing to sell my shares at a higher price, I can sell a call above my effective cost. 🎯 Suppose my effective cost is $79.41. I could consider a covered call with a strike such as $82, $83 or another level that matches my outlook. ⸻ 🏆 Step 7: Why Sell a Covered Call? 💵 The covered call allows me to collect another option premium while holding the shares. 📈 If IAU remains below my call strike until expiration, the call may expire worthless. I keep my 100 shares and keep the premium. 🔄 I can then potentially sell another covered call. 💰 This creates another source of option income on top of any movement in the underlying asset. 🐶 My thinking is therefore: Sell put → collect premium → get assigned → sell covered call → collect premium → potentially get called away → repeat. 🎡 That is the basic Wheel. ⸻ 🚀 Step 8: What If IAU Rises Strongly? 🥇 This is where I need to understand the trade-off. 📈 Suppose I own IAU at an effective cost of $79.41 and sell a covered call at an $82 strike. If IAU suddenly rallies well above $82, my shares could potentially be called away. 💰 I would receive the strike price for the shares, while also keeping the option premium I collected. 😊 That can produce a combination of capital appreciation plus option income. 😅 However, there is a major trade-off: if IAU continues soaring after my shares are called away, I don’t participate in all of that upside. 📌 This is one of the most important lessons of covered calls: the premium is compensation for giving someone else the right to buy my shares at the strike price. ⸻ 🧮 Step 9: Thinking About My Real Cost 📊 I like to track the Wheel based on my accumulated option premiums rather than looking at every transaction separately. 💰 In my initial example: Put strike: $80 Put premium: $0.59 Effective cost: $79.41 📈 If I subsequently sell a covered call and collect another $0.50, my accumulated option income becomes $1.09 per share. 🎯 Conceptually, my adjusted economic basis could then become: $80 − $0.59 − $0.50 = $78.91 📌 Of course, for actual brokerage, tax and accounting purposes, I should track each transaction separately. But for my own Wheel journal, this adjusted-cost concept helps me understand how much premium I have generated. ⸻ 🐶 Step 10: I Don’t Want to Chase Premium ⚠️ One mistake I want to avoid is selling options simply because the premium looks attractive. 💡 A high option premium usually exists for a reason. It can indicate higher volatility, a larger expected price movement or greater uncertainty. 📉 If I sell a put simply because I can collect a large premium, but I don’t actually want the shares, I could end up owning an asset that I never wanted. 🎯 My rule is therefore: I sell puts only at prices where I am genuinely comfortable owning the shares. 📞 Similarly, I sell covered calls only at prices where I am genuinely comfortable letting my shares go. ⸻ 🥇 Why I Like Using IAU for This Concept 🏆 IAU gives me exposure to gold through a listed security rather than requiring me to physically store gold. 💡 That makes it interesting for an options-based strategy because I can combine the underlying exposure with listed options. 📊 Instead of thinking only, “Will gold go up?”, I can think in terms of several possible outcomes: Gold rises → my shares can appreciate. Gold stays sideways → option premiums may provide income. Gold falls moderately → my put premium provides some downside cushion. Gold falls sharply → I can still suffer losses because the premium is only a small buffer. 🐶 The Wheel therefore isn’t a magic strategy that eliminates risk. It simply changes how I participate in the underlying asset. ⸻ 🛡️ My Biggest Lesson: Premium Is a Cushion, Not Protection ⚠️ If I collect $0.59, I have only received $59 on one contract. 📉 If IAU falls from $80 to $70, the $0.59 premium does not protect me from the majority of that decline. 💡 My effective cost would still be $79.41, meaning I would have a substantial unrealized loss. 🎯 Therefore, the Wheel works best for me when I select an underlying asset I am comfortable holding and a strike price that gives me a reasonable margin of safety. ⸻ 🥇 My Gold Wheel Framework 🐶 My simple Options Puppy framework for gold is: 1️⃣ IAU around $82 → I decide whether I want to own it lower. 2️⃣ I sell the $80 cash-secured put. 3️⃣ I collect $0.59 → $59 per contract. 4️⃣ If assigned → I receive 100 shares at $80. 5️⃣ After the $0.59 premium → my effective cost is $79.41. 6️⃣ I can then sell a covered call. 7️⃣ If the call expires → I keep the shares and premium. 8️⃣ If my shares are called away → I take the proceeds and can potentially start the Wheel again. 🎡 This is why I call it my Gold Wheel Strategy: I am trying to keep the process moving rather than relying on a single bullish prediction. ⸻ 🏁 Part 1 Conclusion: My Goal Is to Make Gold Work Harder 🥇 My goal isn’t simply to predict whether gold will rise tomorrow. My goal is to create a systematic process around an asset I am willing to own. 💰 With my example, selling the IAU $80 put for $0.59 gave me an effective purchase price of $79.41 if assigned. 📞 If assigned, the next stage is selling covered calls against my 100 shares. 🎡 If those shares eventually get called away, I can potentially return to selling cash-secured puts. 🐶 That is the Wheel: put premium → ownership → call premium → possible assignment → repeat. ⚠️ The important part is discipline. I must be prepared for assignment, prepared for the underlying to fall, and prepared to give up some upside when selling covered calls. 💎 For me, the strategy is less about trying to predict the exact top or bottom of gold and more about having a predefined plan for different market outcomes. $Gold Trust Ishares(IAU)$ $Gold Trust Ishares(IAU)$ am assigned after being called away at $80 Now I am beginner assigned at $80 again with some $Gold Trust Ishares(IAU)$ With 0.50 premium I am down $150