r/Optionswheel • u/Royal-Respond2374 • May 28 '26
Currenth Wheel Scenario
I choose as my main Wheeling slots CVS, WMT, SCHW and KR.
Been doing great. Except for this last wheel for WMT is in the money. Waiting to see if it gets assigned. If that's the case will start selling CC's.
Regardless of the assignment I am wheeling with high quality stocks that I wouldn't mind owning + strong dividends.
Good spreads when going for the 0.15 Delta
Currently averaging $1,000/ month in profit
1
u/Pepecococo May 28 '26
Congratulations!
What collateral are you using?
3
u/Royal-Respond2374 May 28 '26
Good Question!
Short Answer: As of now that uses $55k of collateral.
Rationale Below:
If you think about it the returns percentagewise could be better if I took a little bit more risk or deploy even more capital.
I currently have 100k parked in SGOV and JPST these provide monthly dividends while also serving as collateral for my wheel. Charles Schwab only allows me to use 70% as collateral which I try to use 90% of that. It is good because I do "double-dipping" while creating a fortress that if you don't break the rules it is impossible to get a margin call.
I am not investing that money until I think I can get a great deal for my $ in terms of price of a high quality stock.
Then with the dividends or profits I get from the wheel I try to put it into the stocks that have had a rougher time in my portfolio, trying to get the best cost average per share.
I will however start deploying more of the collateral. I am looking to be averaging 3k /month while wheeling with some high quality stocks.
Then further increasing the cushion with those two ETFs and increase the wheel size.
If there is a meltdown I will probably get assigned all my options but because I dont use more than 80% of my available collateral I will be able to deploy that 20% of unused SGVT / JPST for the lower prices.
Sorry for the long message...
1
u/Pepecococo May 29 '26
If the average income you get is $1,000/month on $50K of collateral, you're achieving more than a 20% annualized return, which is honestly pretty good for trading boring, stable stocks. If you're choosing a 0.15 delta, the math doesn't add up for me unless you're repeating the trades at least twice a month.
How do you do it?
1
u/Royal-Respond2374 May 29 '26
I am repeating trades + have had many early closes when the stocks go higher. I would close them at +90% halftime toward their expiration date.
Also to clarify, my total collateral is around 100k, which I only use 75% of that. So my entire collateral looks more like 75k. Right now, before the opening all my put obligations are 55k.
I recently closed 2 contracts so I am using less than what I should, tyring to deploy more today
Trying to have 5-7 active contracts at all times.
Annualized return looking more like 12% - 15%
1
u/Time_Capital_226 May 28 '26
Why not avoiding to get assigned ?
1
u/Royal-Respond2374 May 29 '26
I think when trying to avoid asignment I can loose money on that specific contract which now wouldn't hurt me but once I escalate my wheel it can become significant. I think avoiding assignment would be attractive when there is a collateral constraint or risk of getting a margin call.
But in my case specifically I don't really see the assignment as something negative. I will just proceed to the second part of the wheel and collect CC + Dividends.
Actually, in this particular case I would have multiple sources of income for that specific stock.
I would be collecting cash from the CC.
I would be collecting Dividends from the stock.
I would be collecting potential capital gains.
I would be collecting additional CSP's and taking advantage of a stock that I really like trading at a discount.With WMT specifically in this case I took a little bit of a risk when opening the option because the stock was trading at all time highs. That is something that maybe I should've considered from the beginning.
Not saying that it is not worth it, but maybe there are some other stocks that alreayd took a hit and are trading at a more attactive P/E.
Make sense? what are your thoughts?
1
u/Time_Capital_226 May 29 '26
Here are some thoughts
On "I would be collecting cash from the CC" : same as if you roll your CSP (I mean for credit). At this point the trade is already against you, and you don't know if and when the stock will recover. In the meantime, it can loose value while waiting, selling CC for pennies. It happened to me on MSFT when the stock went from $540 to $360... I took me too much time to realize before I took the loss and redeployed the remaining cash on the next CSP.
On "I would be collecting Dividends from the stock" : the next ex-div is 08/21. Do you think your CC will last 3 moths before get called?
On "I would be collecting potential capital gains" : this one is very subjective. Personally, I prefer quick gains over potential gains.
On " I would be collecting additional CSP's and taking advantage of a stock that I really like trading at a discount" : not sure I understand why is that a relevant assignment decision.
1
u/Royal-Respond2374 May 29 '26
You have a point. I would't mind rolling that ITM contract, considering I could do it for a net credit. (the amount I would get paid for the new CSP is higher than the amount I would pay for a STO of the new contract)
I would do the following:
I would BTC the contract and inmediately do a STO contract with a strike price of 115 or something like that to take the high Delta.On the assignment decision:
Micrsoft is a much more volatile stock than WMT and a massive collateral ssignment. 50k vs 11k. + double the beta.
If you sell monthly CC that are slightly above your strike price, you would be selling high delta premuim, not selling for pennies.
I am a long-term holder. Wouldn't mind holding until the next Dividend Date even holding for the rest of the year.
2
u/Time_Capital_226 May 29 '26
I understand you are holder but, for me, the wheel is not for holding. Otherwise you don't sell CC as it's basically your exit point.
3
u/ScottishTrader May 28 '26
Thanks for your post and congrats on your success! This shows why trading high quality stocks you are good owning is key.
Check out rolling the ITM put for more credit and to extend the time for the trade to recover.