Learn all about this popular trading strategy
"The Wheel" is an options strategy that involves continually writing options . Depending on what stage you are in the wheel strategy, you either sell a cash secured put (CSP), or sell a covered call.
When selling a cash secured put (CSP), you must have the cash collateral to buy the shares in the case it expires in the money.
When selling a covered call (CC), you must have a call's form of collateral, which is 100 shares of the underlying.
And so The Wheel goes on and on, where you continually earn premiums on the contracts that you sell. Often, traders will line up what to run on their wheel at the beginning of a given month, and monitor the trades throughout the month as the contracts move towards expiry. Other traders use very short-term CSPs (3-4 days to a week) which have a very high probability of profit and sell them just days before expiration.
In today's "Kangaroo Markets" 🦘, as the The Wheel Screener team likes to call them, there seems to be an infinite supply of meme stocks like GME, AMC, NOK, and the like . In short, the market is ripe with these high volatility stocks which cause premiums on options to skyrocket - perfect victims for The Wheel.
In summary, The Wheel strategy is a trading strategy that has a longer time frame than intraday trading, selling option premium on companies that you would anyway like to own or that you would like to own in the future. That's the beauty of The Wheel.
The problem is, there's just too much noise in the markets these days. But The Wheel Screener makes it easy for you - scanning the entire market (7000+ securities and 32767 contracts) to find those best trades which offer the highest reward vs. risk, against the relative recommendations and ratings of the underlying itself.