Why I Hate The Wheel (And How I Trade It)

Learn how to trade options and futures using strategies that are consistent, mechanical and repeatable.

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Not Financial Advice! This content is for Entertainment and Educational Purposes Only. All financial decisions made by the viewer should be done after talking with a licensed professional.

[michaelhaidee]

This is the one and only YT channel regarding market trading that is real. Never have liked the "wheel" for all the reasons you stated.

[vincentmartin]

Marcus Heitkotter was a guy selling the wheel strategy about 4 years ago when the market was going up, he stopped posting on his channel after 2022. Karl Domm subpoenaed for his trading records and it showed he only made 3% in 3 years and made 2 million selling courses on the wheel strategy.

[kevinenyeart]

Thank you Tom. I am a big fan. Love the Income Navigator service. But, I do have to push back on a statement that you made in this video. You said that the only way that a person is happy getting assigned/owning the underlying stock/ETF/Future is "because the trade went against you." That is not true, at least not for me. You can pick the price that you want to get long and get paid to wait for assignment at your predetermined entry price. I've done it many times, and then I hold the stock or position from there, for years sometimes. When it gets near my exit price, I sell the covered call. I firmly believe that an investor or trader should have an exit strategy for any potential trade, before they enter it. That has worked very well for me, and I do believe that selling calls against long positions is a conservative way to increase returns and lower cost basis while waiting for your predetermined exit price. Once again, thank you for all that you have done and continue to do for so many people, me included. You are helping so many people get better. Awesome.

[bccsivxx-xxivvii]

1:12 I mostly sell covered calls, occasionally cash secured puts, but I always treat the premium as a basis reduction. For me it doesn't have anything to do with which way the stock is moving, it's just easier for me to keep track of profit per share when I finally sell the stock. You're right, it's income, but most of my trading is in IRAs so it doesn't feel like income and I guess technically it isn't. I much prefer selling calls over puts. If I like a stock, which includes liking the premium on calls, I usually just buy it and sell a call soon after. I will sometimes sell very short term puts expiring the same week or maybe the week after, instead of buying the stock outright right away.

I typically sell weekly calls too or at least short term, sometimes 2 or 3 weeks out. Rarely do I sell them more than a month or 6 weeks out. You mentioned liking the further out calls, but typically I can collect more premium in total by selling a weekly call 12-14 times than I would selling a call expiring three months out. Plus I'm not locked into a single strike price that whole time and can adjust the strike every week or two with the stock price.

Thanks for the video.

[henrywinterheld]

It's funny that you mention Buffet, that is exactly how he got into coke (KO). He sold put options for the price he thought was favorable and got assigned. But, it's what he wanted anyway and he got it at his price.

[desolator]

That's why you only do wheels strategy on stocks you actually want to own.... naked puts are crazy dangerous

[coulte]

while I appreciate this video, I am a bit surprised this was an opportunity to show how your portfolio of trades was impacted by an actual fairly large down day and VIX spike which we haven't had in a while and there is no update? Yes, I'm sure you covered it with people in the group but I generally appreciate your transparency so I was hopeful you would share when it isn't all "new all time highs" and profits and how you managed(or didn't adjust) with the volatility spike. Those are the real times to teach lessons I'd say. I do think it's a great channel was just hoping it would be talked about.

[johto]

I made ROI of 40-60% two years in row wheeling some stocks, then lost almost all of it riding few sour grapes down to shitters, even doubled some down by BUYING LEAPs, ugh! Lessons learned, wont touch any single stocks in the future, only broad indexes (and futures) 👍

[DPS_CountJame]

So - you hate the "wheel" and yet you explain how you *would* trade it mid-way through the video (and say you do use the wheel). I respect your views but I disagree with your method of communication and approach. Nevertheless I added to your video views.

[KilgoreTroutAsf]

Pro move: buy two later OTM puts with a lower strike than the put you are selling to cap your losses and even make a profit if the stock tanks.
More often than not if a stock suddenly tanks the volatility will also skyrocket, making the puts worth a lot even if their strike is below your assignment.

[RodSerling-yp]

I will gladly get assigned at resistance, but Im an investor. Option premium to me is the gravy, or the icing on the cake.

[miked]

Why sell puts on a stock you don’t really want? I want to be assigned on my puts, your thought process is way different then mine.

[maddstaxx]

in my experience with the wheel, a few things are most important. 1: the stock cant be overbought(because pull backs can be more severe even on great stocks) 2: always sell puts at prices that make sense valuation-wise. ive been running the wheel for years and ive only been burnt once selling risky put options during a severe market pullback. after i messed up that one time, i choose a low delta on great stocks that have recently pulled back or are trading at low valuation sideways. i consistently get about 40% apr on my money which is about 3.5% monthly and the risks are near zero. you can sell more risky options on over valued stocks and get much higher premiums, but you are begging to lose alot of money.

[Pengkui]

33:31 When MCD drops below 280, the 295 call will be worth less than 2.00, and you won't be able to sell for 5.00. Same on 35:45, when your CL gets assigned at 70, the 77 call may be worth less than 1.50.

[cats_ARE_better_than_you]

Yeah the wheel can be tough especially with leverage. The 'Trade with Joseph' guy was down $150k on last year's 10% pullback. If we had crashed from there he could have wiped out his entire account. I prefer not to be assigned.

[_dser]

For me it's a very distinct set between premium collection and basis reduction:

Premium collection when I'm hyper-wheeling futures. I just want the premium and I want in and out as fast as possible. Using weekly ATM puts to start, getting out with weekly ATM calls to close. I don't worry about the actual points from the contracts (much) but more so the premium.

Basis reduction is when I get some kind of quick run up or gap in my long-term portfolio I'll sell a far OTM call at for whichever ticker had the run-up. If it keeps running I get some gains, but mostly just want to get a small bit of cash back against my positive position. So not even a true "wheel" just the similar mechanics. I also make sure not to sell calls against tax lots with a <1 year holding period.

[farhanalimahomed]

Tom, thanks for the video. You've mentioned many times that your annual returns beat the returns of an index like the S&P500 by many percentage points. If that type of consistency is maintained for many many years, one would expect huge returns due to the compounding. So, why would anyone want to risk buying and holding individual company stocks over the strategy of selling premium and beating index returns?

[aattville]

thanks for your thoughts and Ideas I have been building a portfolio over the years. I am looking forward to learning the futures ideas you like

[michaelhaidee]

BTW, Yield Max TSLY is doing a reverse split. Lol.

[frankgibbons]

Thank you Tom. One question? How do you wheel on futures? I thought all futures were cash settled? If you got assigned on oil, what happens then in order to allow you to then sell a call??