The Wheel Strategy Example - UBER
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- เผยแพร่เมื่อ 5 ก.ค. 2024
- To get the transcript and MP3, go to: www.rockwelltrading.com/coffe...
Intro: 00:00
Overview Of "The Wheel" Strategy: 00:35
Part 1 - Selling PUTs: 1:02
Part 2 - Assigned UBER: 2:39
Part 3 - Sold CALLs On UBER : 3:53
I'm a huge fan of trading "The Wheel." This strategy requires just a few hours a week and I'm able to trade it even while on the go. So in this video, I'm going to show you an example of a "Wheel" trade I took in UBER while travelling through Germany with my two kids this past summer.
Here's the breakdown of the trades I've taken in UBER as part of a Wheel Trade:
1) Trade: Sold the 7 of the 30 strike Put Options that Expired August 14th for $25 = $175
2) Trade: Bought 400 Shares of UBER at $30/share = $12,000 Stock Buying Power
3) Trade: Sold 4 of the 31 strike Call Options that Expire August 28th for $52 = $208
Now taking a quick look at my account you'll see that right now I have around $1000 in unrealized profits (i.e. if the markets were to tank those profits vanish). So today I want to go ahead and take around $600 off the table today depending on our fills.
Doing the math on the trade, right now I can close the trade today and would realize about 93% of the max profit for this trade (once again dependent on the fill)...that's pretty good! Especially with UBER's looming battle with the state of California over its contract workers. Now, could UBER continue to climb higher? Of course! But for me, taking the profits and running makes the most sense to me.
If you'd like a more complete breakdown of "The Wheel" strategy, check out this video here: • The "Wheel" Options St...
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Very good explanation. Thank you
😊 You are welcome! I am glad that this helps!
Very helpful. Thank you Markus
😊 You are welcome! I am glad that this helps!
Keep doing what your doing, I'm with you. Exactly what I've been looking for, many Thx, I'm keeping it simple, You are a wonderful mentor, Best Wishes to you and your family
😊 You are welcome! I am glad that this helps!
100% agree. I'm really enjoying the pace of the explanation. Very easy to follow. It's taking a lot of the mystery and 'scariness' out of options. I've lost quite a bit learning what to not do. It's great to have clear examples.
GREAT video btw!! Thank you.
You are welcome! 😉
Great summary and example of the wheel strategy. It would be great if you could include some guidance on what to do if Uber drops to $26 per share after you're assigned. You typically sell aggressive CSPs... when the trade doesn't go your way, it's probably not going to be that close to your assigned strike price. Most likely you're going to be underwater a bit more than that.
It would also be helpful to play the strategy out a few weeks forward where the stock price continues to go down. Your calls expire worthless but you're losing money in increasing unrealized losses each week as the stock price drops further from your cost basis. What do you do then? Cut your losses? Sell calls for barely any premium? Hold, wait and hope for price recovery and better premium? Risk selling calls at a strike price that could result in your shares getting called away at a loss? Strangle? Roll? This scenario happens frequently if you're trading aggressively and new traders need to both be aware of it and know how they are going to manage the losing position when they encounter it.
If not handled properly, one mistake on a bad trade could erase weeks or months of gains... or worse if you're using margin. I'd recommend adding this "scenario" as a step in each one of your example videos. Not including this paints an unrealistic picture of what the wheel strategy is. It doesn't always win, and it isn't as easy as just printing money selling premium on stocks that "always go up".
Thanks again!!
Thanks for posting this. You have covered most of my thoughts and concerns. I believe before taking any trade in the "Wheel" strategy....all scenarios of the life of the trade should be discussed and understood. Not talking about grind down and crash markets while presenting the trades during bullish markets is just dangerous.
Hi Thomas, great question! I actually did a video on this yesterday. It's about a trade that kept going down - more than 20%!
Here's the video: th-cam.com/video/K_zBGpLrO34/w-d-xo.html
Let me know if this helps.
Thanks for sharing
Awesome! Thank you for watching!
Your good at what you do sir. I like your videos. You do great content.
Awesome! Thank you for watching! :)
Thanks Markus
You are welcome! ;)
What happened to Markus? No video in 1 year. Best content I ever saw on options …
Hello! I have daily live stream. Here is the one today th-cam.com/users/live6adhpFiNL1g?si=fqSfP0ilPt1zKfcV
@@rockwelltradingservices after more than 20H of videos watched you just became my hero
Awesome!
I hope this makes it clear why I LOVE this strategy so much! Are you trading "The Wheel" strategy? Let me know in the comments :)
If you're asking about the technical specification like ms or ns, I don't know. I usually get my fills right away. 👍
I started the wheel last week on ATVI and WYNN but closed my puts on Friday. For practice I did sell 2 puts @ 13.50 on FEYE with exp on Nov 13. unfortunately earnings are due out before exp.
Stock selection is super critical for successful "Wheel Trades". I'm avoiding selling puts on stocks that report earnings before expiration.
at least they are forecasting positive earnings finally but i might close at breakeven on Monday afternoon.
Great video, do you prefer a weekly option contract as opposed to a 30-45 days? If yes/no, why?
Hi Kelvin, YES: I prefer weekly options with 3-10 days to expiration because it gives me more flexibility when I have to adjust the trade. Here's an example: th-cam.com/video/K_zBGpLrO34/w-d-xo.html
Does this help?
Hi Markus, That link to the transcript doesn't work (for me at least). Thanks for the video, always good, good, good.
What about selling a put credit spread at desired strike price to get things going, and if if price ends up below the short put .. just close the long for extra profits??? (I realize this might only work if the stock gets there fast after entry, AND far less premium taken in if the stock stays flat or bullish).
Hello Markus thank you for all your videos, your channel is gold!
I wanted to ask you two question.
1. Is there a better strategy I can use rather than the wheel? I have a 500k account and do the wheel on stocks I don't mind holding like apple,amzn, ,nflx... I don't want to have a margin account. The wheel has been working very good but is there a better strategy?
2. What strategy should you use during a bear market or if stocks crash and stay low for a while? Since with the wheel wouldn't produce much premium if stocks crash?
Thank you!
Hi Alex,
1.) YES, I would definitely use The Wheel Strategy
2.) During the down move in Feb / Mar 2020, I almost doubled my account in 8 weeks using "The Theta Kings" Strategy. I'll DEFINITELY use that one again in a bear market.
Alex, it might make sense for you to look into our private Mastermind. Have you had a chance to talk to Lisa about this?
I am first one to comment! Like always great videos Markus!
Thank you! :)
hi Markus! Fantastic content! I have a question, about selling calls orders that we have to use it, do you recommend let the orders expire worthless or close the contract a few day/s before expiration to collect the 85-95 % of the premium? Thanks
Hi Margar, that's a great question. I always put in a profit taking order at 90% of the profits, unless it's the day of expiration. Then I let it expire. Does this help?
@@rockwelltradingservices yes, thank you so much sir !!
You are welcome! :)
Hi Markus. I notice in the beginning your Tastyworks screen at top show Option buying power $22k and stock BP $45k. If the number of shares assigned at strike exceeds the $22k does the $45k still cover the cost or does the $22k limit the number of contracts you would be allowed to sell? I'm a bit unclear on what Tasty is showing with respect to option BP.
Hi Tom, there's no "margin" on options since options are already leveraged. So if you put $50,000 into a margin account, you have $50,000 in buying power for options and $100,000 in buying power for stocks.
When you get assigned, you no longer have options, so the buying power for options increases and since you are assigned the stock, the buying power for stocks decreases.
Does this help?
How do you protect yourself if UBER price makes a severe downward move say 20/share or worse?
What happen to that 300 shares of UBER? Is that means the buyers only exercise 400 and leave the 300 (maybe buyer sell it instead of exercising)?
What strike do you usually use when you sell the call? I see you were assigned on UBER at 30 but you chose the strike of 31 when selling the calls. Do you follow a rule on deciding this strike?
Hi Jignesh, I'm using my "Wheel Income Calculator" to determine the "best" strike price and expiration based on the stock price, the volatility, the expected move and the premium.
The strategy is good, but wouldn't it make more sense to include the $400 shares ($12k) that were automatically assigned in your profit/loss statement?
hi markus could we copy your postions and follow your portfolio in real time entered price exit risk do you have an application to copy by phone
Hi Alex, I do have a text alert service and I'm also sending you a push notification through our app. If you're interested, contact my team at support@rockwelltrading.com and they can give you more information.
Talk soon. 😀👍
How much capital do you think is necessary to do the wheel strategy?
In this example you collect $125 in premium, and need $21.000 in capital to even be able to sell those puts.
How do i use the wheel strategy with a $2000 account?
Hi Fabian, I recommend at least $10,000 for a margin account so that you have $20,000 in buying power.
If you don't have $10,000 (yet), I recommend starting with the "PowerX Strategy" to build you account.
Does this help?
@Fabian 21 Select a stock that costs less than $20 per share. Sell a csp to get the wheel rolling. 8) Putting all your eggs in one basket and having no extra cash to make adjustment, DOES make it a bit riskier than if you had a larger account.
Why did you not get all 700 shares?
👍😊
:) Thank you for watching!
how did you sell 7 puts but only got 400 shares when assigned?
Yes, that was interesting. Never happened to me before. I guess that some of the buyers of the puts didn't exercise their option. Some brokers require the trader to let them know if they want the shares. So if you assumed that you're automatically getting them, but your broker was waiting for your email whether you want them or not, then it could be that some options expire - even if they are in the money.
Does this help? 😀
Why exactly assigned 400 instead of 700 shares please?i’d like to know , thx
It seems that nobody wanted to buy the shares from me. And options buyer has the RIGHT but not the obligation to buy the shares. Seems that the trader on the other side of my trade decided not to exercise his option. Does this help?
@@rockwelltradingservices thx for explaining , it helps
You are welcome! :)
Okay so lets say aug 28 and uber is
It is. In my own opinion, you should use this strategy only on stocks you feel good about holding it for a while, or on this case if you are ok with buying UBER for $30.
you mean selling puts.. selling puts is you want to purchase shares at a lower price.. selling calls on the other hand is when you already have 100 shares and you only sell your shares when the price at expiration is over your strike price..
Hi Joe, great question. I actually did a video on this yesterday. Take a look: th-cam.com/video/K_zBGpLrO34/w-d-xo.html
Does this help?
Gustavo, you are 100% right! 👍
@@rockwelltradingservices Thanks, that video was super helpful actually. At one point while explaining lowering the cost basis on TQQQ in that video, you sold puts instead of calls and said you would explain why that happened, and then never did. can you elaborate on that?
Hi is it true that in this trade you'd need $12000 in your account to purchase the 400 Uber shares at $30?
yes that is true.. if you're on a margin account, it might be less than that.. when you sell a put, your broker will take that 12k as collateral to make sure you have the funds if you get assigned..
Yes, that is correct. In this example, I'm trading a $100,000 account. So I'm only using a fraction of my buying power.
Does this help?
Thank you all. Yes just wanted to get it confirmed in my mind so I can be sure of the kind of account size required for this strategy
Glad it helped. Let me know if you need anything else 👍
@@23nikeel As long as you have enough money to buy 100 shares, you can sell a csp to get the Wheel rolling. 8)
Why did you get assigned 400 Shares if you had sold 7 puts?
Seems that there weren't enough Put holders who wanted to own the stock. You can tell you broker up to 90 min after the close on Friday that you do NOT want to exercise your right to sell the shares at the strike price. And that's what happened: A Put BUYER backed out.
@@rockwelltradingservices great! Thanks for your time
Very good explanation, thank you
😊 You are welcome! I am glad that this helps!