Ep46 - Lost in Home Depot

Dan explains why wheel traders must think about technical analysis differently from momentum or breakout traders. Using a Home Depot analogy, Dan shows how the right tool for the job matters—especially when selecting indicators for skate-objective trades. He dives into oscillators (with a focus on RSI) and introduces a new strike-selection concept he’s developing.

Key Topics

• Why trends and momentum are often the enemy of wheel traders
• Using technical analysis to reduce trades per wheel cycle
• Choosing the right indicators for skate-objective trades
• Oscillators and how they differ from breakout indicators
• Deep dive into the Relative Strength Index (RSI)
• Overbought and oversold signals for covered calls and cash-secured puts
• RSI divergences and what they signal for wheel traders
• Introduction to the PAS (Price-history Anchored Strike) indicator
• Why wheel traders avoid “trendy” stocks
• Overview of volatility analysis as part of the options trader’s trifecta

Key Takeaways

Wheel traders don’t want momentum. Strong trends often force rolls, increase trade count and slow down wheel cycles.

Technical analysis should reduce activity, not increase it. The goal is fewer trades per cycle, not more signals.

Oscillators are better tools for wheel traders. Indicators like RSI help identify waning momentum rather than breakouts.

RSI can improve strike selection. Overbought and oversold reversals—and divergences—can increase the odds of skating successfully.

Indicators don’t predict the future. They provide a small statistical edge when used correctly.

Volatility matters as much as price. Understanding whether options are overpriced or underpriced is critical for consistent income strategies.

Connect

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Next Episode Preview: Next time, Dan goes deeper into volatility analysis, expanding on how wheel traders can evaluate implied volatility, historical volatility, and upcoming catalysts to improve covered call and cash-secured put decisions.

Disclosure:

Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document

Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.

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