How to Buy Low and Sell High in Today Market Using Options Wheel Strategy

[BlueWaterSailor]

Hey, when I run the wheel on individual stocks, I think about it more as Swing Trading strategy with options. In other words, I start selling puts only at a point where I would normally start getting long the stock. Curious if you incorporate any technical analysis or other factors in your decision process.

I'm not much of a believer in TA, so - no. Although I do look at the long-term trend of the stock as well as looking for dips that seem to have stalled out; I suppose you could call that a primitive sort of TA. I think of it more as price/volume action.

But I also look at the premium for a given strike/expiration, and consider that against the average for that stock. If anything, it's even more important than the above. I'm not sure what you'd call it, except maybe a still-developing sense of smell for where the gold is buried.

And yeah, "swing trading with options" is not a bad take on how I think about it as well.

 

[jys78]

I agree with your post in general but I keep seeing people throw this "covered call == naked put" mantra and it's just not true

The difference: when trading covered calls you also get dividends.

Lol. You don't think market makers are aware of dividends? You don't think they are accounted for in option prices?

 

[winstonwee]

I've done that. To make $5k in one month with a $30k account, you must be using full margin. That's fine as long as the market keeps going higher. However, when I used that strategy (still do, but more selectively), I ended up carrying dead money junk in my portfolio for a while. Example, buying CHK at $7 that eventually went bankrupt. Buying KSS at $47, UAL at $80 / $65, WYNN at $115, and MPC at $80 only to watch them all drop substantially last February. Still holding though except for KSS...finally dumped that this week at a small profit considering all the calls I was able to sell against it.

no I do not use 30K
if you have watch my video I have 70k+ at the moment

 

[winstonwee]

I did know the thread get so much reply and sorry if I am not able to reply to everyone of you

 

[Saltynuts]

I'm not a HUGE option guy, but I know my way around. And I see absolutely no alpha in this system. You are just trying to time the market, and you will ultimately fail. Just sell the short straddles, roll if needed, profit, day in, day out.

 

[winstonwee]

I'm not a HUGE option guy, but I know my way around. And I see absolutely no alpha in this system. You are just trying to time the market, and you will ultimately fail. Just sell the short straddles, roll if needed, profit, day in, day out.

no i am not timing the market i am just using options to buy low and sell high. I let the trade play out by itself

 

[winstonwee]

It can be done

 

[qlai]

Just sell the short straddles, roll if needed,

Where’s the alpha in that?

 

[Saltynuts]

Where’s the alpha in that?

Explained it in another thread - whichever way the underlying breaks you are using the other guy's that bought the legs (which guy depends on which way it breaks) to offset what would otherwise be your losses.

 

[winstonwee]

Explained it in another thread - whichever way the underlying breaks you are using the other guy's that bought the legs (which guy depends on which way it breaks) to offset what would otherwise be your losses.

More risky in my opinion. But everyone has different strategy and different method. If sell straddle at the wrong time at gme. It would be pretty fast to be game over