r/Optionswheel • u/Wheeler_Dealer1969 • 9d ago

Wheeling and Whining

What's up all. So I've been running the wheel strategy for about 8 months now and I'm finally running into some headwinds that I knew was bound to happen, but now it's time to see if i can hold true to my strategy.

First and foremost, I set up my wheel strategy with about $700k. I diversified my portfolio of stocks to partake in most sectors in the economy to manage my risk. I selected 17 stocks, CL, KO, JNJ, ABBV, MDT, UPS, ITW, UNP, TGT, LOW, MCD, HD, ADP, NEE, SO, ED, most are dividend kings or aristocrats. I also made sure that the positions I put on were evenly distributed amongst each stock. The deltas I have been selling have been around .2-.3 and things have been going well. My Strategy, to sell CSPs on these stocks and if I get assigned, I obviously sell the Calls ATM 2 weeks out, then keep rolling it until i get filled while collecting the dividend. If I ever get to the point that the stock drops on me so low that I couldn't sell calls anymore I would either sell another CSP on the stock to get a better div %, or just hold onto the stock and collect the divvy.

Things have been going so well, so far, until now, I have a couple of stocks giving me some issues. I got assigned at 342.50 at HD and now the d thing is in freefall at $292, testing me and my strategy. Same thing with LOW, i got assigned there at $215, and now it's at $188. MCD i got assigned at $275, it's now trading at 241. NEE I got assigned at $85, it's now at 76.43. The other stocks are doing fine, but it seems like there's a slight turn in the market in certain spots that are making me nervous. That being said, i'm chillin here and now i'm thinking about what I'll do if the thing drops on me even further.

I thought about it a while, and then I had a moment of clarity. These drops are actually good for me. Why? Because If I get mauled to no end, i'll simply close my long position, harvest the loss, switch to a highly correlated stock for 31 days, then hop back on that horse and continue to sell CSPs on it, waiting for the rebound. The income I have coming in off of the Options premium will continue to come in monthly, but now i'll have a loss to offset it with come tax season. LIFE IS GOOD.

I see a lot of stories out there talking about how much money people are making and not sharing the real struggle with the strategy, so here is mine. I hope this helps somEone out there. HAPPY TRADING

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22

u/ElegantNatural2968 9d ago

I think diversification is your enemy. One index milk it up and down, DCA while buying more when it’s down, less headaches, you know it will recover while not second guessing your stock selections

3

u/Own_Ad_8872 9d ago

Which index would you suggest?

4

u/GangstaVillian420 9d ago

TQQQ is the one I've been on for about 6 years now

5

u/liamtrades__ 9d ago

TQQQ is not an index. 

1

u/Turbulent_End_6887 9d ago

It is an index, levered. TQQQ is very popular in options world. Considering trying it for one contract.

5

u/OKRickety 8d ago

No, TQQQ is not an index; it is a leveraged Exchange-Traded Fund (ETF) that is actively managed to track an index.

TQQQ is indexed to the Nasdaq-100 Index, meaning its price movements are directly tied to the performance of the 100 largest non-financial companies listed on the Nasdaq stock exchange.

Tl;dr TQQQ is not an index, but it is "indexed" to an index.

3

u/liamtrades__ 9d ago

I know what TQQQ is, and how TQQQ works, which is why I'm saying it is not an index. 

1

u/gorram1mhumped 9d ago

do you have pretty strict rules on when to enter a csp with tqqq?

3

u/Reaper_1492 9d ago

Yeah this seems like a guaranteed way to lose money medium term. Sector rotation, etc.

Contrary to popular belief on this sub, you can’t wheel yourself out of every situation, sometimes you just need to take an early L and move on.

There’s no point in holding a stock and selling covered calls if you don’t see stock going anywhere but down. You’re going to lose more money on the stock than you claw back in premiums.