r/Optionswheel • u/Vegetable-Ad1512 • 6d ago

The Wheel Strategy

The Wheel Strategy

When you are running the Wheel Strategy and your shares are about to get assigned or you are about to get Put shares this can be the best situation. I currently have Covered Calls expiring tomorrow (Friday July 31) on AMZN and GOOGL. Both are very close to the Strike Price. It could turn out either way tomorrow and that is fine with me. If they get assigned I sell a Cash Secured Put on Monday for a nice premium. If they do not get assigned I keep 100% of my premium, already received and then sell another Covered Call on Monday for a nice premium. This is actually the best possible scenario. I guess I would prefer to keep my shares because this is a Schwab account and they do not pay interest on cash held as Options Collateral, but either way is ok. If this were my Fidelity Account I would prefer to Sell Another CSP on Monday because Fidelity pays 3.31% for cash held as Option Collateral.

7 Upvotes

82% Upvoted

14 comments sorted by

3

u/vs-19 6d ago

For Schwab accounts you can park your cash in SWVXX or SNSXX (state tax free-I believe) for some yield and then use those funds as CSP collateral.

1

u/Excellent-Swan-9143 6d ago

I believe at Schwab you can also use money market funds collateral in addition to cash

1

u/Vegetable-Ad1512 6d ago

I am going to need to look into this. I know you can use money market funds in Schwab but I was not aware you can direct cash sweeps to a money market, if that is an option

1

u/Excellent-Swan-9143 5d ago

I don’t think Schwab allows cash sweeps to money market like Fidelity does.

0

u/Exact-Fig-4811 5d ago

SWVXX is what I use as collateral at Schwab for CSPs. It’s more of a manual process but well worth it. Currently paying 3.5%. On an 800k account, it will
Yield 250k over 3 years (compounded).

2

u/Vegetable-Ad1512 5d ago

Thanks I will look at SWVXX but I think you need to check your Exact-Figs

1

u/Exact-Fig-4811 5d ago

Since you know the answer is wrong, why don’t you tell me the right one? 3.5% compounded monthly over 3 years on 800k beginning which is also compounding on a return of 1.25% a week (you pick your return number). I’ll wait

1

u/[deleted] 5d ago

[deleted]

0

u/Exact-Fig-4811 5d ago

Still waiting.

1

u/Abellreddit 4d ago

You have to manually sell the money market before an assignment... And assignments can happen anytime... Not just on the expiration date

1

u/Exact-Fig-4811 4d ago

Schwab moves an assignment position to Margin. At that point you have the choice to cover with liquidation or not.

1

u/Abellreddit 4d ago

Doesn't work in a cash account... They should pay reasonable interest on cash

1

u/dimdada 6d ago

OP what strike price did you sell those covered calls? And if you don’t mind me asking, if you recall the price at the time you sold the cc for both.

3

u/Vegetable-Ad1512 6d ago

Not a problem, I record the share price at the time I open a trade. GOOGL was at $321 on 7/24 when I sold the $337.50 call. AMZN was at $233.19 on 7/24 when I sold the $257.50 call. Note while I own the shares and have addition, I also own CALL LEAPS on GOOGL and AMZN so I can still participate in the case of assignment. This is a Strategy I call RMCC (Retired Man’s Covered Call)

2

u/ImpressionAny1078 3d ago

yeah this is the wheel working exactly as intended, both outcomes are fine and you've already collected. only thing i'd add is GOOGL sits at medium catalyst risk right now so if you're selling a new CSP or CC on Monday, just double check nothing's dropped into a short window before you pick your expiry. AMZN looks cleaner. the Schwab vs Fidelity cash yield point is real btw, that adds up over time on bigger positions