Ep81 - Master Class on the Wheel

As he does during his live weekly Wealth Builder Trade Room, Dan takes listeners inside his own IRA to demonstrate how he manages Wheel trades in real time. He walks through several positions and explains the thought process behind deciding whether to sell puts, write calls, roll an existing position, wait for a better opportunity or simply let the trade develop.

Using examples from his actual portfolio, Dan shows how the Wheel is less about finding one perfect trade and more about methodically managing a series of decisions. He covers assignment, net zero rolls, earnings volatility, technical analysis, option premium and the importance of knowing when the math no longer justifies a trade.

Key Topics

• How Dan methodically reviews and manages Wheel positions in his IRA
• What happens after assignment on a cash-secured put
• Using net zero rolls to move strikes and manage positions
• Managing deep in-the-money covered calls when a stock rallies
• Why time value matters when selecting options to sell
• Taking advantage of higher implied volatility around earnings
• Using support, moving averages, RSI and PAS Bands to guide decisions
• Why sideways stocks can be particularly attractive for the Wheel
• Using option premium to offset negative stock scalps
• How wishlist orders can create opportunities without forcing a trade

Key Takeaways

• Treat the Wheel as a process, not a collection of isolated trades. Dan's approach is to work through positions methodically, starting with the broader market and then focusing on stocks that require attention, particularly as expiration approaches.
• Assignment is simply another step in the Wheel. After being assigned shares from a cash-secured put, the next decision may be to sell a covered call, but timing and pricing still matter.
• Rolling can give a position more room to work. Dan demonstrates how net zero rolls can be used to change strikes while continuing to manage the overall position.
• Don't sell an option just for the sake of selling one. When managing an in-the-money covered call, Dan looks for enough remaining time value to justify the new option. If the economics aren't there, the trade doesn't make sense.
• Higher implied volatility can create attractive premium opportunities. Dan's earnings-related put trade illustrates how elevated IV can produce substantially richer premium, but that additional potential return comes with additional risk.
• Sideways stocks can provide an ideal environment for the Wheel. Repeatedly selling puts and calls can work particularly well when a stock remains within a range and time decay is allowed to do its job.
• Not every Wheel trade will unfold perfectly. A stock can run through a call strike or create the possibility of a negative scalp, but accumulated option premium can help offset those less-than-ideal outcomes.
• Sometimes waiting is the trade. When a stock becomes overextended or the setup isn't favorable, Dan is willing to give the position time rather than immediately adjusting it.
• Wishlist orders can help investors stay disciplined. Instead of chasing premium, Dan places orders at strike prices and premiums he'd be happy to receive and lets the stock come to him.

Connect

Want to see Dan put these concepts into practice? Join the Wealth Builder Trade Room, where Dan trades his personal IRA live, walks through his option selection and adjustments step by step and discusses the stocks and long-term investments he's analyzing.

The class meets every Friday at 11:15 a.m. Eastern / 10:15 a.m. Central.

Visit MarketTaker.com/wealth to learn more and join the Wealth Builder Trade Room.

If you enjoyed this episode, subscribe to Wealth Building With Options on your favorite podcast platform and leave a review to help more investors discover the show.

For more information about subscriber-only articles, video training, monthly Ask Me Anything sessions, unusual options activity alerts, and access to Dan's real covered call and cash-secured put trades, visit https://wealthbuildingpodcast.com.

To learn more about Dan Passarelli, Market Taker Mentoring, and his book Build Consistent Wealth With Options, visit https://markettaker.com.

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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