Let’s start off with two key reminders on using the wheel strategy effectively and the flexibility of selling options to boost your income. Let’s dive in!
1. Choose the Best Stocks for the Wheel Strategy
When it comes to the wheel strategy, not all stocks are created equal.
Here’s the rule: only run the wheel on stocks you actually want to own.
Think Long-Term: Choose stocks you believe in and don’t mind holding, even if they take a temporary hit. If you’re running the wheel and selling cash-secured puts, you’ll want to be okay with owning the stock if you get assigned. Once you own the shares, you can start selling covered calls to generate premium income.
Don’t Chase Premiums: Don’t sell covered calls or cash-secured puts on just any stock to collect premium. Why? Because if the stock drops and never recovers, those premiums won’t make up for your capital loss. So, stick with stocks you actually want in your portfolio.
Ideal Wheel Stocks: Look for stable, high-quality companies with strong fundamentals—companies that are likely to recover from any downturns. Think solid names in tech, energy, or other resilient industries. The Mag8 - AAPL AMZN MSFT TSLA NVDA NFLX COST META and now PLTR as well.
By choosing stocks that you’re comfortable holding, the wheel strategy can help you make consistent income without worrying about holding a dud in your portfolio.
Be always ready for a party !
2. The Flexibility of Option Selling
A big part of why I love selling options is the flexibility it gives you. You don’t need to sell options every week or every month. You can simply sell them when it suits your strategy and financial goals.
Extra Income on Your Schedule: Option selling is perfect if you’re looking to make a little extra cash without the stress of day trading. Even if you’re just bringing in $100 a week, that’s an extra $5,200 per year—not bad for a side hustle. And maybe someday, with consistency, it could become a main source of income.
Consistency Over Frequency: You don’t need to trade all the time. Focus on quality over quantity. When you see a good setup on a stock you want to own, sell a cash-secured put. When you own shares you don’t mind holding for a while, sell a covered call. There’s no need to rush into trades if the setup doesn’t align with your goals.
Perfect for Supplementing Your Main Income: Selling options can be a great supplement to your primary income. Plus, it’s scalable. The more you learn, the more you can grow it into a more significant income stream at your own pace.
The takeaway?
Don’t feel pressured to sell options constantly. Use it as a flexible tool to add to your income on your terms.
Ending Thought: The Market After the Election
With the recent election results, we’re stepping into a new phase. Trump has been elected President again, and with Elon Musk now heavily involved in the administration, we could be looking at some very interesting moves in tech, energy, and space sectors.
The markets may respond with volatility as new policies and changes roll out. Musk’s involvement could bring a tech-forward, space-focused agenda that could boost some sectors. If you’re holding stocks in sectors that align with this vision, it could mean more opportunities to capitalize on volatility with options selling.
But remember, volatility isn’t a bad thing—it’s an options trader’s best friend. Watch for changes in the market, stay disciplined with your strategies, and, as always, prioritize quality over quick wins.
Until next time—happy trading!
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