a) Learning options should take you at least a month. Or two. Or three. Meaning take it slow. Possibly spend some time watching YouTube videos on trading options and digest and compare what you find.
b) The Wheel strategy described above is logically wrong and the person who came up with it doesn’t understand options. But some people who traded options for 20 years believe it’s a great strategy.
This simply shows that options strategies can be controversial, misleading, plain wrong, over promising, etc.
But it may be good to learn why The Wheel is “wrong”, so here is brief explanation.
The Wheel is based on selling naked puts which may result in a stock being assigned to you (sold put may be converted to stock when the option expires), and/or when you own the stock then The Wheel recommends selling calls against the stock owned, using strategy called covered calls. (lookup both “selling naked puts for income” and “selling covered calls” on Google and YouTube).
The problem here is that the author doesn’t seem to understand that selling covered call is 100% identical to selling naked put at the same strike. Basically if you own a stock that costs $100 then instead of selling covered call at $110 strike, you could sell that stock and then sell naked put at $110 strike. The result will be identical.
So The Wheel is a misleading name and strategy for something that can be accomplished simply by always selling naked puts, or by always selling covered calls - without a need to distinguish the two and confuse terminology.
But this may already be too much to digest right now, so come back to this topic after you fully understand covered calls and naked puts.
c) Selling naked puts and naked or covered calls are very popular, but no one seems to have proven that results can be better than simply owning shares of stock.
In fact, no one has proven that any mechanical/systematic way of trading options beats owning stock itself, while there are many professionally managed option strategy ETFs and indexes where you can quickly see their performance. In fact, the CBOE exchange maintains performance indexes for many options trading strategies on the SPX index (or SPY stock) and you can see them here:
http://www.cboe.com/products/strategy-benchmark-indexes
Keep in mind that exchanges want you to trade options and they make money off of you, so it’s even more surprising that they’d publish results of variety of option strategies and prove that they don’t work!
However, some people are very capable of using options creatively, so you just need to be able to learn options to the level of distinguishing crap from something that may have actual potential.
