“The Wheel” would be a great name for a cheesy horror movie about a possessed wheel….
But a strategy to defeat a demonic wheel is not what this is.
I know, I’m disappointed too.
The Wheel Strategy is simply a very safe, and boring, way of trading options.
And it doesn’t take very long to do.
I’m going to write a few short posts outlining the strategy.
It’s actually pretty simple.
The concept is that you buy 100 shares of stock at a discount and sell those shares for a profit. You also make money while waiting to buy them and you also make money waiting to sell them.
I’ll expand the concept just a little more, details will come later.
You sell a cash secured put, buy the stock, sell a covered call, sell the stock, and repeat.
If you don’t end up buying the stock because the cash secured put expired, then you keep that money from selling it and you sell another cash secured put until you do.
If you did buy the stock, you sell a covered call (commonly known as “write a covered call”).
If the stock didn’t sell because the covered call expired, then you keep that money from selling it and you sell another covered call until you do.
That’s it.
It’s simple, it’s relatively safe, and you can do it in a retirement account.
There is one main risk, and there’s ways to reduce or eliminate that risk.
The biggest risk is if the company goes out of business and the stock price goes to zero when you own shares.
Which is why we don’t pick just any company.
I’ll get more into that in a later article.
Disclaimer: I’m not now, nor have I ever been, a financial advisor. Don’t do what I do just because I do it, I am not responsible for your decisions. Learn and do for yourself, take responsibility for your own decisions.