Becoming a good trader takes time and patience. When i first got into trading i was liquidated twice, and lost my entire mortgage deposit. I could have given up, but decided to learn how to trade and put it into practice. 4 years later and i am glad i made that decision.
I agree, that's the more reason I prefer my day to day invt decisions being guided by a invt-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a invt-coach for over 2years+ and I've netted over 1.5million
Controlling my portfolio cost me 7 figure losses in 2022. So, in January 2023 I sought advice from a fiduciary. Through restructuring and diversification with dividend stocks, ETFs, Mutual funds, and REITs, my $1.2M portfolio surged, yielding an annualized gain of 28%.
I've been thinking of going that route, been holding on to a bunch of stocks that keeps tanking and I don't know if to keep holding or just dump them, think you inv-coach could guide me with portfolio-restructuring
‘Grace Adams Cook’ is the licensed advisor I use. Just research the name, you’d find necessary details to work with a correspondence to set up an appointment.
@@OptionsPlay It's interesting that very few traders ever speak about 2 year Bull Call Spreads when they offer the greatest returns that I've witnessed. Why is that? Everyone just super short term in their thinking? An investor can go to a 30 Delta and end up making 2, 3, 4, 5, at times 8 X their money. And you can pull out along the way if it doesn't look like Tesla or NVDA etc...will end up there, without losing much or any capital.
One doubt. At 1:00:34 once you got assigned, you started selling calls for the strike price at which you got assigned. Now what if the underlying stock or indices keep falling again and again to a point that your 429 strike price never yields any premium at all? In your example, fortunately it bounced back to 430, and hence you could continue selling puts again, but don't know what would you do for the case I mentioned above. Thanks for your time and this excellent videos
I addressed this in the video, yes there is the possibility that you collect very little income, but usually there is still some very small yield. Remember that you are comparing this to a buy/hold strategy that would have the same downside risks without any yield.
@OptionsPlay so it is ok to keep receiving penny premium for more than year if market crashed, and spy stayed less than 350 for months or even years? It is not about comparing buy and hold. It is about how long you continue to receive penny premium.
1. What time are you buying these puts on Fridays? If they are PM settled are you buying puts at 3:55pm EST? 2. On 10/20/23 you were assigned I assume at 4pm EST. If you were assigned at 4pm, when do you sell the covered call that expires on 10/27? After hours trading?
He never said that he is Buying Puts. Infact Selling Puts Naked. You can not Sell Covered Calls or any Options during After Hours Trading. Assignment is always after the Day of Expiry, usually next day.
Brilliant, very encouraging. The spreadsheet was straightforward and easily understandable. Agreed, you need 50K or more to cover assignments. Thank you.
What Tony missed out is a comparison between the returns from Weekly Covered Calls and the Passive Wheel Strategy over a period of six months. S&P returns were around 20%, Passive Wheel around 38% but what about Weekly Covered Call Strategy Returns?? ( I call it Reverse Wheel Strategy... (Sell Covered Calls ITM - Get Assigned - Sell Puts ITM - Get Assigned - Sell Covered Calls ITM )
This is AWESOME!!!! I appreciate the fact that you don't mind being circumspect (sharing the various perspectives - possible losses and recovery). You know your ishhhhh
These return numbers are not realistic because you should use each entry gain divided by your bankroll rather than the different margin requirement each time. Or at least you should always use your highest possible margin requirement (20k+) because that is the money you need to set assign for doing this strategy, and likely plus some additional fund for buffering, and these are your real working capital. You are overestimate your % return by a lot here.
I agree that many people are considering NVDA as the "Stock of the year." However, I'm curious about which stocks could potentially become the next Nvidia in terms of growth over the next decade. I've allocated $200k for investment, aiming to retire comfortably.
I think the next big thing will be A.I. For enduring growth akin to Nvidia, it's vital to avoid impulsive decisions driven by short-term fluctuations. Prioritize patience and a long-term perspective consider financial advisory for informed buying and selling decisions.
Facing a similar situation, I sought advice from an CFP. Through portfolio restructuring and diversification with good ETFs, S&P 500 and growth stocks, I've turned my portfolio around from $200k to over $800k in a few years.
She goes by ‘’Vivian Jean Wilhelm’ I suggest you look her up. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.
If you look at the returns on 30:40 sheet, if you bought 100 shares of spy, you would have had 8700 profit, while by selling the options, you only had about 3000-4000 return. So how does this strategy work on spy. Maybe works for other more volatile stocks like NVDA? The premium is higher in put options?
So this works nicely when markets are in an uptrend. Or you could have started this strategy and bought at the top of the market in 2000, and never recovered until about December 2012.
In an entering bear market, you might be assigned the options and the stocks keep going down. There'll be a period where selling a covered call that is so far OTM that the premiums are very small. Of course, if the stock eventually goes back up, then the premiums become bigger, but the risk comes for certain sectors where the sector can get hit for a long time before coming back up (eg, housing sector ever since fed increased rates)
You’re right. Keep in mind that this strategy is comparable to a long term investment strategy. So consider that when timing when you start trading this strategy.
We are doing "short put" which is bullish and so it is not unusual in a bullish market. Why does Tony say, this is unusual at 30:40. I am little confused. Any thoughts please? Thanks.
Great presentation, but you didn't spend time addressing the margin expense. At about 7+%, your broker would charge you about $70 per week to borrow the money, which is OK if you have it. A way to lessen the pain is to follow the strategy exactly, and buy into a broker's money market fund so you can earn about 4%-5%, (or about $40/wk) for putting up the $50K to buy 100 SPY. If my assumptions are right, the differential margin expense would cost you about $30/week. ($70 interest charge to you minus $40 you earn from the money market.) You should be getting more than $30/wk selling calls. But, you still need $50k to buy 100 SPY to offset the interest charge to you for margin. I think it's still a sound strategy.
Tony, please explain the impact of dividend on selling SPY puts/calls using this strategy. Doesn't selling calls/puts also involve the seller to pay out the dividend when due? Thank you!
Amazing training! So, lets say Tesla is tanking and is at 150 share price and $37 million is bought on Tesla 230 Puts that expire on June 21st (2 months away) would that person make a ton of money if tesla continues to tank?
Hi Tony, very important question here and it was not mentioned in the video: after I sold a weekly put option, if my position has over 50% gain just after one day (given a market rally day), should I close out by buying it back, catching the profit, and then sell a new put at 30 delta, starting a new round of this wheel strategy?
Biggest issue with wheel is the strategy fails when an index peaks. If you are selling calls because you got assigned and the etf/index keeps tanking the premium could get to the point where u basically get nothing on the weekly calls all while potentially losing hundreds or 1000s on the 100 shares. Eventually the calls at your strike price basically will net you a .01 assuming it’s that far out of money. If there is some protection against this in this strategy I’m all for it. Someone let me know. I have the cash but I’ve tried wheel strategy and that’s the issue I noticed. I ended up buying to close the call because it was too far out of the money to generate any premium vs the money I was losing. Your only option seems to be to move your strike price down which puts u at a potential loss on the shares if u have to move down far enough.
Look, the Wheel strategy is not a magical strategy that doesn’t experience any downturns. It’s a strategy to be deployed for your long term investment portfolio. Any long term investment portfolio will drop in value when the market drops. However the wheel strategy will consistently add anywhere from 5-15% annualized yield consistently on that portfolio that will offset some level of downside.
The situation you outlined happened to me where the underlying tanked after assignment so selling calls on the assigned price had very little returns. I actually sold covered calls at a lower strike and kept rolling up and out when the price recovered until I reached the strike price where I was assigned. Do note that this required active management.
Tony, on 10/27/23 why not sell covered call for less, say $420 and collect more premium and also you could get rid of the shares sooner vs $429? Great info. Thank you.
I think trading 2 contracts of MES futures for this strategy is better as it is more capital efficient. Plus we get advantage of closing the contracts in case some negative news happens late night.
If you are not in the financial market space right now, you are making a huge mistake. I understand that it could be due to ignorance, but if you want to make your money work for you...prevent inflation
@powerfulldavinciinvestment3367 because selling put is a bullish strategy, you don't mind to own stock if get assigned. So it is best to sell put on uptrend stocks with great fundamental, technically it is best to select short strike at slightly below support level near at the money to collect more premium n has higher odd the stock will go up. Just avoid trading when a stock has imminent earnings date
@powerfulldavinciinvestment3367 AMD is a good example to sell put. It's an uptrend stock n now pullback to 50 days moving average, I sell weekly put at $172.5 on Monday
Once you are assigned, if you don't have the cash to cover the 100 shares, the cash that the broker lends you will be charged at an interest rate decided by the broker. You did not factor in this aspect as well in your return calculation.
@@tubetop123So here’s the problem with that. If you have to set aside 50k for the strategy in case of assignment and you can’t actively invest ALL 50k then he needs to calculate the return on the entire amount he has set aside instead of just the margin requirement. If you have 50k but you are using 8k in margin then the return is way way less than stated.
@@djayjp Writing a put is equivalent to writing a covered call. So if the market goes against you, the put will be assigned and you will now be long the stock or buy back your put before expiration. Then, to continue with the wheel strategy, you write another put. Rinse and repeat. Writing puts is more efficient than covered calls margin wise and commission wise.
@@imnokasparov I meant "roughly" 50 as in a little over 50 ITM, rather than way ITM like 70 delta. But I realize now I think I misunderstood your point completely - you're talking about replacing the covered call portion of the wheel with a short put? I have no idea how that would work. After assignment, what put at what strike would you sell to imitate a covered call?
Hello Mr Zhang, So what if on 10/20/23 the spot was 400? Would you still sell the 429 strike Covered Call. That wouldn't collect much if any premium. What would you do?
Seems like a platform should just automate this strategy since there's really no decision making, though 5 minutes for one day a week isn't too burdensome.
Our platform can help you identify the exact expiration and strike for this strategy. We are also launching direct trading integration next week which would allow you to directly trade from OptionsPlay for this strategy.
I agree that there are strategies that could be put in place for solid gains regardless of economy or market condition, but such executions are usually carried out by investment experts or advisors with experience.
TRAVISSAMANTHA1 goes deeper than just looking at surface-level trends. She explores technical, fundamental, and sentiment analysis, offering a comprehensive perspective on the market..
TRAVISSAMANTHA1 understanding of market indicators is impressive. She knows exactly when to enter and exit trades for maximum profit. her signals are top notch..
Hi Mr Zhang, What if i just bought $SPY and left it alone to grow? Would I make more profit in the long term rather than doing this wheel option strategy?
95% of options trading is fully electronic market making. They guarantee quotes on both the bid/ask and as a retail trader you will almost never be able to take the full available liquidity on the bid or ask. However, as a general rule of thumb, it’s best to check options liquidity before entering a trade.
Great upload. I have a question. Unfortunately I have short 100 QQQ . What can I do to generate such strategy. Hope to get some feed back from anyone. Thank you in advance.
How do you handle or hedge if the market takes an extended move down i.e. a war or covid situation where the market is down and assigned for several weeks.
I’m so confused. He keeps using the term “covered call” are we not selling a naked call once our naked put is assigned? If not, that means we should just buy 100 shares of the stock while selling puts & calls as stated as opposed to having the margin requirement $ amount in your account
He is indeed 'assigned' the 100 shares, which means he does have to acquire the 100 shares of SPY, but his Broker, because he is a Tier 4 client, enables him to take assignment with partly borrowed funds from his broker and he is partly using his cash. So he is essentially charged a small interest rate (usually around 12-13% annualized in todays market), while he is using his brokers capital to help him acquire the shares. He must have the equity somewhere else though, either via stocks, bonds, or cash, for the broker to allow him to do this. So it is indeed a covered call that he is doing.
ok in that case can I just hold the full 100 shares in cash in order to avoid the interest once assigned? Also, do you think it makes more sense to own 100 shares of the underlying while I sell puts and calls? or does that defeat the purpose of the strategy?
@@drek273 Yes, you can hold the full 100 shares in cash in order to avoid the interest once assigned, sure. It can make sense to hold the 100 shares if you would like to sell calls. If you are looking to sell puts in addition to holding 100 shares, the broker will likely have additional margin requirements (need more cast set aside because you may be assigned on the next 100 shares for the puts you sold and you may need the cash to acquire those in addition to the 100 shares you own).
Once your naked put is assigned you will own 100 shares of the underlying. So you are covered when you go and sell the call, it will not be a naked call.
The return calculation is completely wrong. You NEED to have the ~50k cash available sitting in your account to buy the 100 shares of SPY when you're assigned the put (cash secured PUT, i.e. not naked put). Calculating based off the margin requirement (of a few k) is wrong. If you do NOT have the ~50k cash available, you would be borrowing money from your broker to fund the purchase of the 100 shares of SPY, which is destructive to your returns as your broker would charge you a high interest rate. At any rate, this strategy will generate income alright, but it will NEVER beat the market and is simply a poor use of the ~50k cash.
That's not how margin works on options. There's no borrowing involved. It's just collateral. The rest of what you said is correct however. He's conflating naked selling with the ability to buy the shares if the trade goes against you. Therefore the return calculation doesn't make sense.
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a professional trader but is very advisable you make use of a professional trader as a beginner.
Hi Tony, Are you saying to sell a new naked PUT on the same day your previous PUT expires. Would that not double your margin exposure on the day? Also if you sell the new naked PUT in the morning and the market tanks the previous PUT will get assigned at the end of the day. Now you will own 100 shares and also have a naked PUT. So should you Roll or decide the next day on selling the next PUT. I hope the way I worded it makes sense? or If anybody else understands what I'm asking I'd appreciate you input. Thanks
Thanks for the question. Just to clarify, you should never have two puts at the same time. You would want to close a put before selling a new put to open.
If I am not mistaken, the sell put/call expiration should happen the day before the next put/call happens. So if you are trading this strategy every Friday, place the put/call for next Thu, not next Friday - that will be DTE of 6 days.
You can as long as your broker allows option trading in IRA’s. I have both a Roth and traditional IRA at Schwab where I trade option strategies like this.
Great Video... Since I am trading through my IRA and cannot get Level 4 for margin, I have put a different spin to this strategy I am selling Bull Put Credit spread. Selling a 30 Delta and buying a 10 delta for my protection Current trade Sold 515 put on 4/5 for $2.02 purchased a 505 put for $.057 Net credit $1.45 ($145.00) Putting up $1,000.00 in protection. $145/$1000 = 14.5% ROC . If assigned have cash available to start selling Calls. Your thoughts?
In my opinion, your risk to reward ratios are off with that example. 1 max loss would wipe out 9 weeks of max profits. I aim to make at least a quarter to half of my max loss on credit spreads to reduce the risk
Theoretically you can, however the liquidity in TQQQ doesn't hold a candle to QQQ. You may experience very different results once you factor into transaction costs.
Dont sell Covered Calls on High Growth stocks with fast upward volatility. You will get burned and lose out on potential profits, because the underlying stock will inevitably BLOW thru your strike. $SPY is somewhat more predictable and won't jump 50 points in 1 week like $TSLA or $NVDA for example.
Good strategy when the index is going up. Horrible when it's not. If we can predict the index is going up, just buy SPYU. Nothing will outperform that.
I don't like this I would rather sell in the money covered calls here's why you're talking about having enough capital to own the shares anyways, you have a greater chance of success and the call premiums are much higher than puts w weeklys plus u get the dividend sometimes
But for Capital Efficiency, the returns he's receiving very well may be better than the covered calls. Because he's using just the margin requirements ($8500 to eke out those weekly returns) and even when assigned, he's not coming up with the entire amount to buy the shares. He's using his brokers money to do much of it. That's why the margin requirement says $20K when assigned. So the numbers would indeed need to be crunched to find out whether he is still able to eke out better returns with this strategy based on the capital he is using.
@@JamesDidato ok look right now at the april 6th spy chan...523 put 2.44 523 call 325, close price 523.07 so 7 cents in money if it goes below 523 you own the sares in either case but you collect 33% more premium for 1 week, 5% interest that week is about 50 cents per share so u are slightly ahead w the calls
So its kinda a coin flip w calls a bit ahead but what i like is when stock falls to your price you keep the previous intrinsic value instead of getting no reward for being assigned a put...and u still get paid for the interest difference
I disagree with your numbers. When selling puts your going off the margin requirements of just the put, but in reality you never know when your going to be assigned so you really need 25,000 to 30,000 in cash set aside for this strategy. So really you need to figure your profits off of that margin week after week, which significantly reduces your returns. It should always be off of total margin requirement for the whole trading system.
Having novices sell naked put is ridiculous. That strategy takes $8000 out of your pocket every week to make $200 also ridiculous no I think that's a terrible strategy for people who are new to options because you won't be able to get a level four clearance unless you have a lot of money and experience
What is the difference between a "naked "PUT" and a "cash secured PUT" ? I think the Naked PUT allows you to use margin, thus less capital than on a regular CSP? That's my understanding.
Great content but Wish your videos were shorter 15 minutes tops and it’s kind of annoying asking the audience to type 1 or 2. Also there’s no need to say you are the Chief humbleness please
You need to set aside at least 45-50K for this strategy to be fruitful. You should be clearer in the first slide of your presentation.... Please and this is just one trade on SPY.
Becoming a good trader takes time and patience. When i first got into trading i was liquidated twice, and lost my entire mortgage deposit. I could have given up, but decided to learn how to trade and put it into practice. 4 years later and i am glad i made that decision.
My portfolio has good companies, however it has been stalling since last year. I have approximately $200k stagnant in my reserve that needs growth.
I agree, that's the more reason I prefer my day to day invt decisions being guided by a invt-coach, seeing that their entire skillset is built around going long and short at the same time both employing risk for its asymmetrical upside and laying off risk as a hedge against the inevitable downward turns, coupled with the exclusive information/analysis they have, it's near impossible to not out-perform, been using a invt-coach for over 2years+ and I've netted over 1.5million
Controlling my portfolio cost me 7 figure losses in 2022. So, in January 2023 I sought advice from a fiduciary. Through restructuring and diversification with dividend stocks, ETFs, Mutual funds, and REITs, my $1.2M portfolio surged, yielding an annualized gain of 28%.
I've been thinking of going that route, been holding on to a bunch of stocks that keeps tanking and I don't know if to keep holding or just dump them, think you inv-coach could guide me with portfolio-restructuring
‘Grace Adams Cook’ is the licensed advisor I use. Just research the name, you’d find necessary details to work with a correspondence to set up an appointment.
Tony, enjoy the videos and the fact they they go so well into detail. Keep the hour long ones going!
Thanks, we will definitely continue this. We're even considering slightly longer format to go deep into certain subjects.
@@OptionsPlay It's interesting that very few traders ever speak about 2 year Bull Call Spreads when they offer the greatest returns that I've witnessed. Why is that? Everyone just super short term in their thinking? An investor can go to a 30 Delta and end up making 2, 3, 4, 5, at times 8 X their money. And you can pull out along the way if it doesn't look like Tesla or NVDA etc...will end up there, without losing much or any capital.
This was a really excellent presentation. One of the best I've seen so far. Very clear & concise.
One doubt. At 1:00:34 once you got assigned, you started selling calls for the strike price at which you got assigned. Now what if the underlying stock or indices keep falling again and again to a point that your 429 strike price never yields any premium at all? In your example, fortunately it bounced back to 430, and hence you could continue selling puts again, but don't know what would you do for the case I mentioned above. Thanks for your time and this excellent videos
I addressed this in the video, yes there is the possibility that you collect very little income, but usually there is still some very small yield. Remember that you are comparing this to a buy/hold strategy that would have the same downside risks without any yield.
@OptionsPlay so it is ok to keep receiving penny premium for more than year if market crashed, and spy stayed less than 350 for months or even years? It is not about comparing buy and hold. It is about how long you continue to receive penny premium.
@@OptionsPlaythe other benefit that you didn’t mention is that you will also be collecting dividends if you’re assigned …
New to channel love the content. when is best time to roll covered call? When it hits your break even or if it goes against you fast
If you can buy back a call for less than 20% of the premium you initially collected, it's usually a good time to roll early.
1. What time are you buying these puts on Fridays? If they are PM settled are you buying puts at 3:55pm EST? 2. On 10/20/23 you were assigned I assume at 4pm EST. If you were assigned at 4pm, when do you sell the covered call that expires on 10/27? After hours trading?
He never said that he is Buying Puts. Infact Selling Puts Naked. You can not Sell Covered Calls or any Options during After Hours Trading. Assignment is always after the Day of Expiry, usually next day.
Thank you, very helpful!
Brilliant, very encouraging. The spreadsheet was straightforward and easily understandable. Agreed, you need 50K or more to cover assignments. Thank you.
Glad it was helpful!
What Tony missed out is a comparison between the returns from Weekly Covered Calls and the Passive Wheel Strategy over a period of six months. S&P returns were around 20%, Passive Wheel around 38% but what about Weekly Covered Call Strategy Returns?? ( I call it Reverse Wheel Strategy... (Sell Covered Calls ITM - Get Assigned - Sell Puts ITM - Get Assigned - Sell Covered Calls ITM )
Thank you Tony. I am from Hong Kong.
Hi Leandro member from NY
Excellent presentation. Thank you.
Makes perfect sense!!
This is AWESOME!!!! I appreciate the fact that you don't mind being circumspect (sharing the various perspectives - possible losses and recovery). You know your ishhhhh
These return numbers are not realistic because you should use each entry gain divided by your bankroll rather than the different margin requirement each time. Or at least you should always use your highest possible margin requirement (20k+) because that is the money you need to set assign for doing this strategy, and likely plus some additional fund for buffering, and these are your real working capital. You are overestimate your % return by a lot here.
Good teaching. Should add to the beginning slides that you need an account with at least $50k
why do You say that?
No you don't cash secured puts you just cover the price if is assigned
@@Sanholomcyes and the etf his talking about is over 400 dollars a share
@@tjadd5454yeah to pricey for me
@@drek273 watch the video. He literally says that. It is needed when you get assigned and have to sell calls
I agree that many people are considering NVDA as the "Stock of the year." However, I'm curious about which stocks could potentially become the next Nvidia in terms of growth over the next decade. I've allocated $200k for investment, aiming to retire comfortably.
I think the next big thing will be A.I. For enduring growth akin to Nvidia, it's vital to avoid impulsive decisions driven by short-term fluctuations. Prioritize patience and a long-term perspective consider financial advisory for informed buying and selling decisions.
Facing a similar situation, I sought advice from an CFP. Through portfolio restructuring and diversification with good ETFs, S&P 500 and growth stocks, I've turned my portfolio around from $200k to over $800k in a few years.
Your CFP must be really good, I hope it's okay to inquire if you're still collaborating with the same CFP and how I can get in touch with them?
She goes by ‘’Vivian Jean Wilhelm’ I suggest you look her up. To be honest, I almost didn't buy the idea of letting someone handle growing my finance, but so glad I did.
Thank you! I entered her full name into my browser, and her website came out on top. I filled her form and i hope she gets back to me soon.
Absolutely loved this course! I've been trading options with a financial advisor for over a year now and I've pulled in approx $680k.
Did a background check on google for this lady you mentioned and I'm impressed by her record. I was also able to reach out. thank you for recommending
This comment should be deleted and your accounts should be banned
Howdy 🤠 from Arlington, Texas
Hello,
Raymond from Brooklyn,New York
5- insightful thankq
If you look at the returns on 30:40 sheet, if you bought 100 shares of spy, you would have had 8700 profit, while by selling the options, you only had about 3000-4000 return. So how does this strategy work on spy. Maybe works for other more volatile stocks like NVDA? The premium is higher in put options?
Starts at 21:30
Hello…from Philippines-- first timer
Thanks for coming
So this works nicely when markets are in an uptrend. Or you could have started this strategy and bought at the top of the market in 2000, and never recovered until about December 2012.
Yes, the success of almost all options selling strategies is dependent on when you start, but so is every long term investment strategy.
In an entering bear market, you might be assigned the options and the stocks keep going down. There'll be a period where selling a covered call that is so far OTM that the premiums are very small. Of course, if the stock eventually goes back up, then the premiums become bigger, but the risk comes for certain sectors where the sector can get hit for a long time before coming back up (eg, housing sector ever since fed increased rates)
You’re right. Keep in mind that this strategy is comparable to a long term investment strategy. So consider that when timing when you start trading this strategy.
Don't you think if these were monthly then risk of assignment would have been alot lower?
We are doing "short put" which is bullish and so it is not unusual in a bullish market. Why does Tony say, this is unusual at 30:40. I am little confused. Any thoughts please? Thanks.
because going long 100 stocks usually would be even better in a very bullish market compared to selling a put/wheeling.
Thank you for the video. Which is the best broker to do options?
Weekly credit spreads is good!
How you calculate the return in the spreadsheet
Great presentation, but you didn't spend time addressing the margin expense. At about 7+%, your broker would charge you about $70 per week to borrow the money, which is OK if you have it. A way to lessen the pain is to follow the strategy exactly, and buy into a broker's money market fund so you can earn about 4%-5%, (or about $40/wk) for putting up the $50K to buy 100 SPY. If my assumptions are right, the differential margin expense would cost you about $30/week. ($70 interest charge to you minus $40 you earn from the money market.) You should be getting more than $30/wk selling calls. But, you still need $50k to buy 100 SPY to offset the interest charge to you for margin. I think it's still a sound strategy.
Tony, please explain the impact of dividend on selling SPY puts/calls using this strategy. Doesn't selling calls/puts also involve the seller to pay out the dividend when due? Thank you!
When I get assigned, does it only happen on the day of expiration or the assignment can happen on any day before the expiration?
Technically, assignment can happen any day but in the real world, the vast majority of assignments happens at expiration
Amazing training! So, lets say Tesla is tanking and is at 150 share price and $37 million is bought on Tesla 230 Puts that expire on June 21st (2 months away) would that person make a ton of money if tesla continues to tank?
Hi Tony, very important question here and it was not mentioned in the video: after I sold a weekly put option, if my position has over 50% gain just after one day (given a market rally day), should I close out by buying it back, catching the profit, and then sell a new put at 30 delta, starting a new round of this wheel strategy?
Hi first timer
From Nigeria
Is roll-over to a later date a feasible alternative if one doesn't want to own the etf ? thx
Biggest issue with wheel is the strategy fails when an index peaks. If you are selling calls because you got assigned and the etf/index keeps tanking the premium could get to the point where u basically get nothing on the weekly calls all while potentially losing hundreds or 1000s on the 100 shares. Eventually the calls at your strike price basically will net you a .01 assuming it’s that far out of money. If there is some protection against this in this strategy I’m all for it. Someone let me know. I have the cash but I’ve tried wheel strategy and that’s the issue I noticed. I ended up buying to close the call because it was too far out of the money to generate any premium vs the money I was losing. Your only option seems to be to move your strike price down which puts u at a potential loss on the shares if u have to move down far enough.
Look, the Wheel strategy is not a magical strategy that doesn’t experience any downturns. It’s a strategy to be deployed for your long term investment portfolio. Any long term investment portfolio will drop in value when the market drops. However the wheel strategy will consistently add anywhere from 5-15% annualized yield consistently on that portfolio that will offset some level of downside.
@@OptionsPlay fair enough appreciate the comment! Solid videos overall. 🙏 Thanks
The situation you outlined happened to me where the underlying tanked after assignment so selling calls on the assigned price had very little returns. I actually sold covered calls at a lower strike and kept rolling up and out when the price recovered until I reached the strike price where I was assigned. Do note that this required active management.
Tony, on 10/27/23 why not sell covered call for less, say $420 and collect more premium and also you could get rid of the shares sooner vs $429? Great info. Thank you.
I think calculating your return on the margin required is a bit rich. What is the rest of your money doing?
I think trading 2 contracts of MES futures for this strategy is better as it is more capital efficient. Plus we get advantage of closing the contracts in case some negative news happens late night.
If you are not in the financial market space right now, you are making a huge mistake. I understand that it could be due to ignorance, but if you want to make your money work for you...prevent inflation
I only sell put on etf or stock in uptrend when the price pullback to support level (50 sma or trend line) n this increase the odd
Thanks for sharing!
@powerfulldavinciinvestment3367 because selling put is a bullish strategy, you don't mind to own stock if get assigned. So it is best to sell put on uptrend stocks with great fundamental, technically it is best to select short strike at slightly below support level near at the money to collect more premium n has higher odd the stock will go up. Just avoid trading when a stock has imminent earnings date
@powerfulldavinciinvestment3367 AMD is a good example to sell put. It's an uptrend stock n now pullback to 50 days moving average, I sell weekly put at $172.5 on Monday
@powerfulldavinciinvestment3367 I sell weekly put near the uptrend support area n is ok if get assigned
Good content but please improve the sound. Maybe the speaker was too close to the mic. It makes it a little harder to focus on the information
How do you calculate the margin requirement
Your brokerage firm has a formula, but it’s approximately 20% of the underlying market value.
@@OptionsPlayyou would need the full $50k cash if assigned though, correct?
Once you are assigned, if you don't have the cash to cover the 100 shares, the cash that the broker lends you will be charged at an interest rate decided by the broker. You did not factor in this aspect as well in your return calculation.
He mentioned you need an account of $50k
@@tubetop123So here’s the problem with that. If you have to set aside 50k for the strategy in case of assignment and you can’t actively invest ALL 50k then he needs to calculate the return on the entire amount he has set aside instead of just the margin requirement. If you have 50k but you are using 8k in margin then the return is way way less than stated.
If you want to lower your margin, instead of writing covered calls, write in the money puts.
How do you handle the times when the sold puts go against you (as opposed to being assigned the shares then selling calls)?
@@djayjp Writing a put is equivalent to writing a covered call. So if the market goes against you, the put will be assigned and you will now be long the stock or buy back your put before expiration. Then, to continue with the wheel strategy, you write another put. Rinse and repeat. Writing puts is more efficient than covered calls margin wise and commission wise.
@@imnokasparov selling ITM puts at I assume ~50 delta? Then if you're assigned, you would sell the covered call also at 50ish delta?
@@trtnec I think you meant ATM not ITM because 50 delta would be ATM. But yes, that would be a strategy for maximizing the extrinsic value.
@@imnokasparov I meant "roughly" 50 as in a little over 50 ITM, rather than way ITM like 70 delta. But I realize now I think I misunderstood your point completely - you're talking about replacing the covered call portion of the wheel with a short put? I have no idea how that would work. After assignment, what put at what strike would you sell to imitate a covered call?
Hello Mr Zhang Does the brokerage charge an interest rate or fee on the Margin? If so, how much is the interest or fee?
Hello. Have a great day trading.
Hello Mr Zhang, So what if on 10/20/23 the spot was 400? Would you still sell the 429 strike Covered Call. That wouldn't collect much if any premium. What would you do?
Seems like a platform should just automate this strategy since there's really no decision making, though 5 minutes for one day a week isn't too burdensome.
Our platform can help you identify the exact expiration and strike for this strategy. We are also launching direct trading integration next week which would allow you to directly trade from OptionsPlay for this strategy.
I'm favoured, $60k every week! I can now give back to the locals in my community and also support God's work and the church. God bless America.
I agree that there are strategies that could be put in place for solid gains regardless of economy or market condition, but such executions are usually carried out by investment experts or advisors with experience.
TRAVISSAMANTHA1 goes deeper than just looking at surface-level trends. She explores technical, fundamental, and sentiment analysis, offering a comprehensive perspective on the market..
TRAVISSAMANTHA1 strategy has normalized winning trades for me and it's a huge milestone for me looking back to how it all started.
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what is the difference between a naked put and a cash secured put? Is the margin requirement not the same?
Hi Mr Zhang, What if i just bought $SPY and left it alone to grow? Would I make more profit in the long term rather than doing this wheel option strategy?
Hi Tony, after my Sell Put gets assigned, what happened if nobody buy the Sell Call from me?
95% of options trading is fully electronic market making. They guarantee quotes on both the bid/ask and as a retail trader you will almost never be able to take the full available liquidity on the bid or ask. However, as a general rule of thumb, it’s best to check options liquidity before entering a trade.
Great upload. I have a question. Unfortunately I have short 100 QQQ . What can I do to generate such strategy. Hope to get some feed back from anyone. Thank you in advance.
"Indices rally 60% of the time in all timeframes." Absolutely not true.
please improve the sound quality!
I will next week. My 2 year old lost one of my AirPods last week!
can you do this with /ES?
Yes, you can but contract sizes are way larger and may not be suitable.
PS. I would like to practice this “wheel strategy” with my paper account just to see how it would play out!
Hi Tony, is this strategy suitable for ETFs with leveraged 3x bull or bear
He addressed this. He doesn’t recommend it because of the increased chance of gapping
This is called a cash-secured put and not a naked put. You got to have about $45,000 to hold the SPY that was assigned to you.
You need to apply for a higher options level to sell it naked but it can be done. You do not need to post the $50,000 in cash to sell a SPY put.
If you don’t have the $50,000, what happens when you get assigned?
What would be the range of annual income, minus taxes, for this strategy starting with $1 million?
How does a beginner get approval to trade options? I'm stuck in Catch-22 .
Liquid ETFs are expensive these days. Any suggestions for trading the wheel with an account less than $20k?
How do you handle or hedge if the market takes an extended move down i.e. a war or covid situation where the market is down and assigned for several weeks.
I’m so confused. He keeps using the term “covered call” are we not selling a naked call once our naked put is assigned? If not, that means we should just buy 100 shares of the stock while selling puts & calls as stated as opposed to having the margin requirement $ amount in your account
He is indeed 'assigned' the 100 shares, which means he does have to acquire the 100 shares of SPY, but his Broker, because he is a Tier 4 client, enables him to take assignment with partly borrowed funds from his broker and he is partly using his cash. So he is essentially charged a small interest rate (usually around 12-13% annualized in todays market), while he is using his brokers capital to help him acquire the shares. He must have the equity somewhere else though, either via stocks, bonds, or cash, for the broker to allow him to do this. So it is indeed a covered call that he is doing.
ok in that case can I just hold the full 100 shares in cash in order to avoid the interest once assigned? Also, do you think it makes more sense to own 100 shares of the underlying while I sell puts and calls? or does that defeat the purpose of the strategy?
@@drek273 Yes, you can hold the full 100 shares in cash in order to avoid the interest once assigned, sure. It can make sense to hold the 100 shares if you would like to sell calls. If you are looking to sell puts in addition to holding 100 shares, the broker will likely have additional margin requirements (need more cast set aside because you may be assigned on the next 100 shares for the puts you sold and you may need the cash to acquire those in addition to the 100 shares you own).
Once your naked put is assigned you will own 100 shares of the underlying. So you are covered when you go and sell the call, it will not be a naked call.
Ok thank you!@@OptionsPlay
The return calculation is completely wrong. You NEED to have the ~50k cash available sitting in your account to buy the 100 shares of SPY when you're assigned the put (cash secured PUT, i.e. not naked put). Calculating based off the margin requirement (of a few k) is wrong. If you do NOT have the ~50k cash available, you would be borrowing money from your broker to fund the purchase of the 100 shares of SPY, which is destructive to your returns as your broker would charge you a high interest rate.
At any rate, this strategy will generate income alright, but it will NEVER beat the market and is simply a poor use of the ~50k cash.
That's not how margin works on options. There's no borrowing involved. It's just collateral.
The rest of what you said is correct however. He's conflating naked selling with the ability to buy the shares if the trade goes against you. Therefore the return calculation doesn't make sense.
Are there any ETFs or mutual funds that employ this strategy so we don't need to do these trades ourselves?
The first step to successful investing is figuring out your goals and risk tolerance either on your own or with the help of a professional trader but is very advisable you make use of a professional trader as a beginner.
Any recommendation for a professional trader.
Any recommendation of a good trader.
*Yes she's mostly on Telegrams.*
*@TABBRAN.*
*She has a verified blue star on profile.*
thoughts on the same strategy but on 0DTE?
I’ve done 0dte wheels successfully. My only issue with it is the premium at 30 Delta is minimal and so the risk to reward ratios are not good
Is there a risk of being assigned a contract after hours? During trading hours, you are OTM, but after hours, it goes ITM on the day of expiration.
Hi Tony, Are you saying to sell a new naked PUT on the same day your previous PUT expires. Would that not double your margin exposure on the day? Also if you sell the new naked PUT in the morning and the market tanks the previous PUT will get assigned at the end of the day. Now you will own 100 shares and also have a naked PUT. So should you Roll or decide the next day on selling the next PUT. I hope the way I worded it makes sense? or If anybody else understands what I'm asking I'd appreciate you input. Thanks
Thanks for the question. Just to clarify, you should never have two puts at the same time. You would want to close a put before selling a new put to open.
Thanks Tony, and also thank you and Jess for great video explanations.
If I am not mistaken, the sell put/call expiration should happen the day before the next put/call happens. So if you are trading this strategy every Friday, place the put/call for next Thu, not next Friday - that will be DTE of 6 days.
How but a defined risk weekly strategy?
Can you use this strategy with an IRA account whereby, you are not allowed to use margins?
You can as long as your broker allows option trading in IRA’s. I have both a Roth and traditional IRA at Schwab where I trade option strategies like this.
Great Video... Since I am trading through my IRA and cannot get Level 4 for margin, I have put a different spin to this strategy I am selling Bull Put Credit spread. Selling a 30 Delta and buying a 10 delta for my protection Current trade Sold 515 put on 4/5 for $2.02 purchased a 505 put for $.057 Net credit $1.45 ($145.00) Putting up $1,000.00 in protection. $145/$1000 = 14.5% ROC . If assigned have cash available to start selling Calls. Your thoughts?
In my opinion, your risk to reward ratios are off with that example. 1 max loss would wipe out 9 weeks of max profits. I aim to make at least a quarter to half of my max loss on credit spreads to reduce the risk
How about TQQQ?
Theoretically you can, however the liquidity in TQQQ doesn't hold a candle to QQQ. You may experience very different results once you factor into transaction costs.
Why select 30 delta?
Tunnel sound. Need better mic.
I will next week. My 2 year old lost one of my AirPods last week!
Good information, Echo is annoying
Will fix for the next session! My 2 year old lost one of my AirPods and working with just 1 for the week! :)
Dont sell Covered Calls on High Growth stocks with fast upward volatility. You will get burned and lose out on potential profits, because the underlying stock will inevitably BLOW thru your strike. $SPY is somewhat more predictable and won't jump 50 points in 1 week like $TSLA or $NVDA for example.
Sound is poor.
Good strategy when the index is going up. Horrible when it's not. If we can predict the index is going up, just buy SPYU. Nothing will outperform that.
❤❤
Does anyone have a sample spreadsheet for keeping track of returns? Im terrible with spreadsheets and cant seem to get one to work.
I don't like this I would rather sell in the money covered calls here's why you're talking about having enough capital to own the shares anyways, you have a greater chance of success and the call premiums are much higher than puts w weeklys plus u get the dividend sometimes
But for Capital Efficiency, the returns he's receiving very well may be better than the covered calls. Because he's using just the margin requirements ($8500 to eke out those weekly returns) and even when assigned, he's not coming up with the entire amount to buy the shares. He's using his brokers money to do much of it. That's why the margin requirement says $20K when assigned. So the numbers would indeed need to be crunched to find out whether he is still able to eke out better returns with this strategy based on the capital he is using.
@@JamesDidato ok look right now at the april 6th spy chan...523 put 2.44 523 call 325, close price 523.07 so 7 cents in money if it goes below 523 you own the sares in either case but you collect 33% more premium for 1 week, 5% interest that week is about 50 cents per share so u are slightly ahead w the calls
So its kinda a coin flip w calls a bit ahead but what i like is when stock falls to your price you keep the previous intrinsic value instead of getting no reward for being assigned a put...and u still get paid for the interest difference
Do you have a school I can come to
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I disagree with your numbers. When selling puts your going off the margin requirements of just the put, but in reality you never know when your going to be assigned so you really need 25,000 to 30,000 in cash set aside for this strategy. So really you need to figure your profits off of that margin week after week, which significantly reduces your returns. It should always be off of total margin requirement for the whole trading system.
I prefer to do PMCC on XSP or SPX. No risk of early assignment, similar margin requirements, no risk of having to purchase 45k of stock if assigned.
I've already factored that into the spreadsheet
@@thomas1942can you please elaborate on this ? What if you only have a 5000 account ?
30 delta weekly premium is very low almost nothing
Bro needs to improve voice quality of the video
Can not sell naked in an IRA.
DC
Options are so easy. There’s no risk at all
I've never seen a trade with no risk. You must be new to trading.
@@djk-si9ve professional futures trader at the Chicago mercantile exchange for a long time.
Having novices sell naked put is ridiculous. That strategy takes $8000 out of your pocket every week to make $200 also ridiculous no I think that's a terrible strategy for people who are new to options because you won't be able to get a level four clearance unless you have a lot of money and experience
15 min please no need for 1 hour. You’re too wordy.
What is the difference between a "naked "PUT" and a "cash secured PUT" ? I think the Naked PUT allows you to use margin, thus less capital than on a regular CSP? That's my understanding.
doesn't seem too difficult at all to sell options like this
Great content but Wish your videos were shorter 15 minutes tops and it’s kind of annoying asking the audience to type 1 or 2. Also there’s no need to say you are the Chief humbleness please
Man do you ever do any video less then 1 hour? Jeez. video should be 5 to 15 min max.
You need to set aside at least 45-50K for this strategy to be fruitful. You should be clearer in the first slide of your presentation.... Please and this is just one trade on SPY.
Cry me a river😊
Exactly what I mentioned as well
And if you put 45-50K aside you should calculate ROI on that amount and that is nowhere near to 1-2% per week.