Why I DON'T Use the Wheel Strategy (and why you shouldn't either)

For those asking for data: imgur.com/a/Uimst9n. Comparing CBOE call-selling indices to put-selling indices, the 30-delta call-selling index (BXMD) has historically far outperformed all of the put-selling indices.

What you're saying makes sense but it's real easy to say "you should have just bought the shares here"

When you said, "you would have got the stock cheaper if you'd just bought down here", meaning you could have bought at 75 vs. 93 when you showed the dip, you forgot to mention all the put income you would have made. I'm happy making 12-18% year without ever owning stock.

Omitting CSPs eliminates the part of the wheel that let's you square up (cash out zero risk) every week, which is typically what you should be wheeling anyway (weeklies). Even if you make 2-4% only in premiums per week, you need to view that as a 10-20% ROI on your risked capital per month on the given security, AND if you don't get assigned, you're risk free every Friday.

So in your example, just sell the 120 put and it is the exact same as your covered call. The two positions are synthetically equal, they have to be. And for people that trade the wheel, you can do the exact same thing selling puts. They are the same.

How would the wheel have compared to just selling CC’s if the premium was used to buy the underlying stock ?

I’m doing a front wheel drive kind of version. 90% covered calls and 10% csps that aren’t really gonna assigned. A month or two in you really know the price range of a stock and it gets very consistent

Nice video. I think it is ALWAYS important to analyze ANY strategy for its pros and cons. I actually prefer PMCC as opposed to the wheel because of the capital required. That is what you are ultimately talking about here. While the Whell strategy does not initially tie up up your money (selling naked puts) you still have to be able to access that money in case you are assigned. So in essence that money is STILL tied up. It is one of the great things about options trading because any strategy can be TWEAKED to match what an investor's projections are and how much rush they are willing to wager.

More downside protection selling csps though

Love the channel man keep doing your thing !

Charlie, thanks for the pointers, they are really useful in knowing your strategy. But I have a question, please. Right now, on 6/25, the market is really near an all time high, and many pundit's are predicting a crash/contraction. So it seems extra risky to assume that stocks that have already been rising will continue to do so. Do you have any advice on if this changes your approach to picking stocks for covered calls?

Good tips and stuff to ponder, thanks!

I think the difference is one of mentality instead of returns. Are your intentions to be assigned or to have everything expire worthless? Short puts are better for people who want the options to expire worthless and covered calls for those who want to get assigned.

So you sell a covered put and if you get assigned then sell covered call? Or do you buy a 100 shares n sell covered call and same time you do covered put? Sorry lil confused

So I have a question. Can you sell the stock when the covered call is still there if the stock goes down or will that mess something up?

I've only been trading options for a little over a year (maybe two?)... and without knowing it, I've been trading with the wheel approach. You make some really good points though. I'm not sure if I can stop with the wheel approach... but I think I might try a strategy of splitting my money so that it isn't all in the wheel, but some focused only on covered calls... and then I'll probably be able to see if one strategy truly wins so much more than the other? Thanks for the new perspective on the different strategies.

Would it work ok to sell both puts and calls at same time if it’s a stock you already own and don’t mind owning more shares if assigned on the puts? Example Palantir now around $26? Maybe call strike is 28/29 and put strike is 22/23? I’m just learning so maybe I’m way off???

Good video, this exact thought about never getting assigned on a CSP for a discount occurred to me as I was looking at a company I'm interested in owning some shares of with decent long term growth potential.

As you said the potential gains from selling puts or calls is relatively the same making the strategy very subjective. It ultimately depends on what stock you plan on running each strategy with.

I’m selling the spx puts 45 dte about 7-8 delta. Buy back at 50%. Thoughts?