I am too conservative on the delta for the wheel stock. I tend to use delta 16 for all purposes. This video wakes me up for a more aggressive delta for wheel stocks. Thanks
I can speak from personal experience about Mistake #5. I've had stocks that dropped so far that you couldn't get a decent premium for the covered call, and rolling up doesn't work because you can't roll up without paying some premium and you will have to pay for any intrinsic value.
Been running the wheel for a year now, and am certainly guilty of mistake #3. I think that come from wanting "to win", rather than "making money". Being assigned used to feel like I failed to pick proper strike prices. But the truth is, some of the best gains can come from assignment. Here's a mistake #6 to add to the list. Not paying enough attention to events. In addition to macro events, any earnings or product demos need to be accounted for, so you can be ready for any volatility.
Great Vid. My stock has been assigned and the price move down. I am not sure what to do since the cover call premium is so cheap above assigned price. Thanks to your vid I think I will just wait. Since the company is doing pretty good.
thanj you for your good advices. I have some difficulties with mistake #4 and #5. If we are assigned , the wheel strategy requests to sell a covered call, and if we wait to selling a covered call we can wait for a long time and losse the possibility to have a regular income. If we sell the corresponding stock of course we can make a big loss. I think choising a good stock is of course very important, but for me it is not enough to prevent from a long period of inactivity in term of income
Great video and thank you for detailed explanation. A lot of TH-cam videos would simply tell you to choose low delta (10-20) just to get the low premium, also without explaining the real purpose of wheel strategy - get assigned and participate in the stock's upward movement. That being said, will you be able to do an tutorial on trading tesla or palantir's wheel strategy? Cheers!
Davis at 22:51 when you mentioned selling ITM covered calls for a loss. But the ITM call sold contains intrinsic value to covers the loss from the higher cost basis, wouldn't it?
Hi 1st I really appreciate your video you are incredible & better than all other coaches in the TH-cam. Thank you for sharing, you will get more in return. Now having said that just have a quick question? When have rolled CC so far and stock keep going up but your 7 months away already with almost same price as stock! What do you do or what are the options? Thank you
Hey Davis, thanks for this very useful video. I like selling cash secured puts, but don’t really like assignment. Going to have allow it to happen, which it has, but paid more attention to volatility than profitable companies. Therefore sometimes a long wait for the price to go up.
Hi Davis love the videos. I was about to say myself, but Davis AMC is gradually losing less money and nearing all time lows 😅 I agree there's probably smarter risks to find out there.
Great vids thank you. I have learned a lot from you. May I ask whether you created your own journals/spreadsheets. If not, do you have any suggestions for good ones? I have created my own but they could be better. Regards Mike
this sounds great, however in Meta had you been in at 250 and you got assigned you'd be in it a long time and would have to have a lot of patience-obviously it would be worth it but would be super hard watching your 250 dollar stock drop to 100
Great video. So curious mind would like to get your opinion on possibly 2 companies to do the wheel strategy on with knowing that I have to purchase 100 shares with about 25K?
Rather than mere 'profitability', is there a balance sheet line item for 'profits from operation' (as opposed to profit from reduce spending for instance)?
Great video. What should I do with CSP on SMCI stock? I wanted to own the stock a while ago when I sold it. I am afraid it might get delisted. Closing the position with buyback will cost me over $50k. It's better off get assigned early so I can own the stock to sell it but not happening. Any suggestions?
it can be done, but why not actually use something that is highly profitable, if you like GLD and SLV then just buy them, but if you like making money then use something with more volume and volatility
TSLA is a profitable company.. im bullish on TSLA for years.. sure i help thru some downtrend but i was still collecting CC premiums.. and now those assigned shares are up up up..
Mistake #6a, selling puts on stocks with good bullish momentum. Sure, you can earn the premium, but you are not taking the advantage meant to be had with the wheel strategy, namely getting the stock for a discount. Just buy the stock, if the momentum is fresh (like in a breakout). Mistake #6b, Same goes with selling calls. If the stock is showing strength and going up, don't sell calls. Wait for weakness/ consolidation to sell calls. Otherwise, you'll leave a lot of money on the table. Mistake #7, selling puts when the stock is at the top side of its range. If a stock is stuck in a range (which is a great time to start wheels), you want to sell puts when the stock reaches the bottom 3rd of that range. Best tool to see this is bollinger bands on a day timeframe.
You can do that though. If it's earnings and there's a lot of volatility I'll put put option in get a nice premium and not get assigned. I usually do it at the price the stock was before the spike worst case scenario I get assigned around the price it was before earnings
@@joeblstrn Like I said, "Sure, you can earn the premium, but you are not taking the advantage meant to be had with the wheel strategy, namely getting the stock for a discount." Also, if you sell the put and the stock drops a lot, it's a losing trade. Starting puts before earnings is actually mistake #8.
Morning Davis, please, can you answer this question.. im very curious. if i sold CSP on MSTR at $255 and i receive $5.85 premium. $25,500 - $585 = my breakeven would technically be $249.15 if you count the premium. if MSTR drops to exactly $249.15 and i am assigned.. i turn around and sell all my shares.. i should not lose or make any money correct?.. but i am still tax on the $585 premium? so i would still lose money?
You only get taxed on profit. If the stock was $585 below your csp at exp, then the put was still worth $585. You are buying the stock at its strike price, which is $585 above the stock price, and then you are selling at market, which is -$585 of what you paid. Equals a $0 net profit.
to clarify, a stock with 50% IV is anticipating a 1 standard deviation (~68% chance) move 50% up or down over the course of a year. to calculate the dollar move anticipated over any amount of days, we can do this formula: Stock Price x IV x sqrt(days till expiry / 365) by calculating the dollar move expected in a given amount of time, you can better percieve the risk you are taking with your trade and then add your own perception of whether that percent move expected is reasonable or if it is overpredicting or underpredicting the move.
yes, i dont want to get assigned. i have my reasons.. #1 reason is im using margin.. im selling CSP and i am not paying any interest on the $25,000 im borrowing.. it is just collateral.. at the same time i receive $500 premiums.. the moment i get assigned, i will pay interest on those $25,000.. this is best strategy for me !
@@eddieolsen100 why would you let it get assigned? you do know you control the expiration.. i been rolling my COINBASE for 1 month and now its expired worthless. CSP made me nice profit..im now in MSTR with 1100 premiums
There is nothing wrong with your strategy, but if you don’t have the cash to buy the stock than it’s not a cash secured put…because you don’t really have the cash to buy the stock. You are just selling naked puts
For mistake 5, if you are holding a good stock that has gone down say baba is down 50% and covered call is sold repeatedly to earn premium to reduce the cost then like last month the price spike up, if your stocks is called, just make sure you buy back and repeat
Whether baba is a good stock or overvalue is subjective but even if you buy at 50% off it has gone down another 50% so the only way is to use the wheel covered calls to help reduce your cost
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28:30 selling the call where you were assigned avoids the wash sale rule and avoids the higher tax rate of short-term capital gains.
@@optionswithdavis thank you 🙏
I am too conservative on the delta for the wheel stock. I tend to use delta 16 for all purposes. This video wakes me up for a more aggressive delta for wheel stocks. Thanks
Its always good for a revision lesson and advice. Many thanks
You're welcome!
I can speak from personal experience about Mistake #5. I've had stocks that dropped so far that you couldn't get a decent premium for the covered call, and rolling up doesn't work because you can't roll up without paying some premium and you will have to pay for any intrinsic value.
Great points!! I was making a lot of these mistakes of avoiding put assignment, rolling calls up. Thanks for these very critical insights.😅
You're welcome!
I am a beginner. Thank you very much for this insight. Much appreciated your guidance!
You're welcome!
Been running the wheel for a year now, and am certainly guilty of mistake #3. I think that come from wanting "to win", rather than "making money". Being assigned used to feel like I failed to pick proper strike prices. But the truth is, some of the best gains can come from assignment.
Here's a mistake #6 to add to the list. Not paying enough attention to events. In addition to macro events, any earnings or product demos need to be accounted for, so you can be ready for any volatility.
Great Vid. My stock has been assigned and the price move down. I am not sure what to do since the cover call premium is so cheap above assigned price. Thanks to your vid I think I will just wait. Since the company is doing pretty good.
Great video, thank you! 👍🏼
You're welcome!
thanj you for your good advices. I have some difficulties with mistake #4 and #5. If we are assigned , the wheel strategy requests to sell a covered call, and if we wait to selling a covered call we can wait for a long time and losse the possibility to have a regular income. If we sell the corresponding stock of course we can make a big loss. I think choising a good stock is of course very important, but for me it is not enough to prevent from a long period of inactivity in term of income
Great info. Subscribed.
Great content especially on choosing the right company. Thank you!
You're welcome!
Great video and thank you for detailed explanation. A lot of TH-cam videos would simply tell you to choose low delta (10-20) just to get the low premium, also without explaining the real purpose of wheel strategy - get assigned and participate in the stock's upward movement. That being said, will you be able to do an tutorial on trading tesla or palantir's wheel strategy? Cheers!
You're welcome! Will consider a video on that. Meanwhile, see this: th-cam.com/video/M3pMZCU97KU/w-d-xo.htmlsi=I_oUirAYYIFYUQme
@ will do! Look forward to more great content :)
Excellent video, exactly what I was looking for!
☺️
Great info! New subscriber! Thank you!
You're welcome!
Davis at 22:51 when you mentioned selling ITM covered calls for a loss. But the ITM call sold contains intrinsic value to covers the loss from the higher cost basis, wouldn't it?
Hi 1st I really appreciate your video you are incredible & better than all other coaches in the TH-cam. Thank you for sharing, you will get more in return.
Now having said that just have a quick question? When have rolled CC so far and stock keep going up but your 7 months away already with almost same price as stock! What do you do or what are the options? Thank you
You're welcome! As for the CC, see this: th-cam.com/video/JOpVi6hkzYg/w-d-xo.htmlsi=5eCv45Bpi4hyeze5
Thanks Davis, great video!
You're welcome!
Hey Davis, thanks for this very useful video. I like selling cash secured puts, but don’t really like assignment. Going to have allow it to happen, which it has, but paid more attention to volatility than profitable companies. Therefore sometimes a long wait for the price to go up.
You're welcome!
Great video Davis! Do you anticipate when you may have an opening in your Mentoring program?
Thanks ☺️ You can join the waiting list as mentioned in the description and you will be informed when it's open for enrollment.
Hi Davis love the videos. I was about to say myself, but Davis AMC is gradually losing less money and nearing all time lows 😅 I agree there's probably smarter risks to find out there.
Great vids thank you. I have learned a lot from you. May I ask whether you created your own journals/spreadsheets. If not, do you have any suggestions for good ones? I have created my own but they could be better. Regards Mike
You're welcome! I just have a simple spreadsheet nothing too fancy.
Very useful video!
☺️
Thanks Davis
You're welcome!
have u tried trading calendar or collar spreads davis?
Do you have a preferred dte?
this sounds great, however in Meta had you been in at 250 and you got assigned you'd be in it a long time and would have to have a lot of patience-obviously it would be worth it but would be super hard watching your 250 dollar stock drop to 100
Beside sell cover Call, normally I will add a "Buy Call + Sell Call" with 6-9 mth timeframe case the stock I wheeled rocket up like PLTR.
Good stuff!
☺️
Great video!
Biggest problem I’m struggling with is finding quality companies below $10. Any recommendations?
SOFI isn't 10, but close at 13.
Great video. So curious mind would like to get your opinion on possibly 2 companies to do the wheel strategy on with knowing that I have to purchase 100 shares with about 25K?
Target
Boeing
Merck
Johnson johnson
Devon Energy
Occidental Petroleum
Xle
Chevron
many goodies
Boeing and Target great premiuns
Rather than mere 'profitability', is there a balance sheet line item for 'profits from operation' (as opposed to profit from reduce spending for instance)?
Great video. What should I do with CSP on SMCI stock? I wanted to own the stock a while ago when I sold it. I am afraid it might get delisted. Closing the position with buyback will cost me over $50k. It's better off get assigned early so I can own the stock to sell it but not happening. Any suggestions?
dam $50k? SMCI is NVDA 3rd largest customers. if they can fix their accounting issues.. they might be OK
But if you know all that knowledge that make you smart and you pick the right compeny... is wheel the best option to profit from it?
Are GLD and SLV etf's suitable for the Wheel Strategy?
it can be done, but why not actually use something that is highly profitable, if you like GLD and SLV then just buy them, but if you like making money then use something with more volume and volatility
to be honest if gld and slv are on your radar you are probably just not making very much money, you should re think how you make money in the market
What if you're just in it for the income and just want to get in and out with no stress?
TSLA is a profitable company.. im bullish on TSLA for years.. sure i help thru some downtrend but i was still collecting CC premiums.. and now those assigned shares are up up up..
Chapters please.
Mistake #6a, selling puts on stocks with good bullish momentum. Sure, you can earn the premium, but you are not taking the advantage meant to be had with the wheel strategy, namely getting the stock for a discount. Just buy the stock, if the momentum is fresh (like in a breakout).
Mistake #6b, Same goes with selling calls. If the stock is showing strength and going up, don't sell calls. Wait for weakness/ consolidation to sell calls. Otherwise, you'll leave a lot of money on the table.
Mistake #7, selling puts when the stock is at the top side of its range. If a stock is stuck in a range (which is a great time to start wheels), you want to sell puts when the stock reaches the bottom 3rd of that range. Best tool to see this is bollinger bands on a day timeframe.
You can do that though. If it's earnings and there's a lot of volatility I'll put put option in get a nice premium and not get assigned. I usually do it at the price the stock was before the spike worst case scenario I get assigned around the price it was before earnings
@@joeblstrn Like I said, "Sure, you can earn the premium, but you are not taking the advantage meant to be had with the wheel strategy, namely getting the stock for a discount." Also, if you sell the put and the stock drops a lot, it's a losing trade. Starting puts before earnings is actually mistake #8.
@@scottamolinariI do the put after the stock goes up. It's only for the week. Many times it's just a day or two.
@@joeblstrn Yeah, but that then has nothing to do with the wheel strategy.
Morning Davis, please, can you answer this question.. im very curious. if i sold CSP on MSTR at $255 and i receive $5.85 premium. $25,500 - $585 = my breakeven would technically be $249.15 if you count the premium. if MSTR drops to exactly $249.15 and i am assigned.. i turn around and sell all my shares.. i should not lose or make any money correct?.. but i am still tax on the $585 premium? so i would still lose money?
I had same question around the taxing
You only get taxed on profit. If the stock was $585 below your csp at exp, then the put was still worth $585. You are buying the stock at its strike price, which is $585 above the stock price, and then you are selling at market, which is -$585 of what you paid. Equals a $0 net profit.
use 1080p for you videos...
to clarify, a stock with 50% IV is anticipating a 1 standard deviation (~68% chance) move 50% up or down over the course of a year.
to calculate the dollar move anticipated over any amount of days, we can do this formula:
Stock Price x IV x sqrt(days till expiry / 365)
by calculating the dollar move expected in a given amount of time, you can better percieve the risk you are taking with your trade and then add your own perception of whether that percent move expected is reasonable or if it is overpredicting or underpredicting the move.
That is all my Mistake , I have 10 CT SMCI....keep rolling1
😢
@@optionswithdavis I see under simplywallstreet still undervaluated at present quotation!.....will see the month to come!
After reading the comments i come to the realization so many people are just gambling and hoping things go their way, scary
yes, i dont want to get assigned. i have my reasons.. #1 reason is im using margin.. im selling CSP and i am not paying any interest on the $25,000 im borrowing.. it is just collateral.. at the same time i receive $500 premiums.. the moment i get assigned, i will pay interest on those $25,000.. this is best strategy for me !
yea, until you get assigned its all sunshine and rainbows
@@eddieolsen100 why would you let it get assigned? you do know you control the expiration.. i been rolling my COINBASE for 1 month and now its expired worthless. CSP made me nice profit..im now in MSTR with 1100 premiums
There is nothing wrong with your strategy, but if you don’t have the cash to buy the stock than it’s not a cash secured put…because you don’t really have the cash to buy the stock. You are just selling naked puts
Which broker you are using?
No such thing as free money
Is fundamental data from Chinese companies trustworthy?
Maybe but I'd be cautious
Never invest in Chinese stocks,. You have tons of good stocks in usa
wheel made me around 65% return of my portfolio this year
Jajajajaja electro cardiogram
For mistake 5, if you are holding a good stock that has gone down say baba is down 50% and covered call is sold repeatedly to earn premium to reduce the cost then like last month the price spike up, if your stocks is called, just make sure you buy back and repeat
Whether baba is a good stock or overvalue is subjective but even if you buy at 50% off it has gone down another 50% so the only way is to use the wheel covered calls to help reduce your cost
So is pltr good for wheel strategy? Or Tesla?