For everyone who likes this video they will be able to financially retire before the age of 59! Give it a try! You can check out my entire playlist on trading options here: kzitem.info/door/PLscTZuOqKWIxSZzy4ObKWDznEsCot_1HU
@GilbertFleming
2 жыл бұрын
One more question for your question and answer session… I own 100 shares of Jpm, mo O and Brookshire Hathaway. I want to own the shares long-term, but I want to write covered calls to increase my income. My June 17 options expired. I have two choices: Number one… Buy more one month covered calls on the Stocks on Tuesday when the market opens up. I would look for a strike price that has a Delta of Les than 0.3 Number two… Wait until the market hits a new high or at least turns much higher than it is today. Should I just sit on my hands for a week or two and wait until the market as an update, and then sell covered calls on the Stocks?
@telefrk49
11 ай бұрын
Great video, i'm 67 years old and have been doing this for a year and a half...i am so grateful to the friend/mentor who taught me this method. I sold a rental house that was positive about 500 per month, i sold the house at the market high in 2022, and now use the cash proceeds to make an amount per month that i never imagined possible...
@aat3tville181
26 күн бұрын
I am actually doing the same thing I have a few more properties to sell but have about 190k doing this making way more with less stress on the money I have 6 more properties to sell
@carlosfelfoldi
2 жыл бұрын
The risk of this strategy and having all your capital stuck seems downplayed. As what happens if sell a secured put at $100, but stock ends at $80 after 30 days? And never returns to a position that can sell a covered call and not be down a crippling amount? Broad indexes in theory should be less prone to this, but what happens with this strategy and ones capital if played during tech bubble burst or 2008?
@JakeBroe
2 жыл бұрын
Doesn't matter. I'm only recommending this on a broad index and even if the index goes down 20% in a year, I keep the Wheel Strategy going collecting premium. I'm not trying to convince you of anything in this video, lol. You can believe it works or don't believe it.
@anthonygardner400
2 жыл бұрын
@@JakeBroe How unhelpful is THAT answer! Geez.
@carlosfelfoldi
2 жыл бұрын
@@JakeBroe Didnt mean to come across as questioning, just more wanting to check have as many of the worst case sceraios thought through. For example, you mention you keep the wheel strategy going by collecting premium, but what happens if you cant sell a covered call that is above your breakeven? That is the risk trying to better understand. As found myself in a position with KHC in which that has been the case. Thank you for all the great content!
@PritamDas_26
2 жыл бұрын
It doesn't have to "return to a position" for you to sell CC. If you sold 100P and index is at 80 then you'll have cost basis of 100 (as you went ITM and got assigned). Now just sell 80 call for next month. Or maybe a higher strike / less premium depending on preference.
@m.a.7762
2 жыл бұрын
Jake, instead of having over 400k, can't you just buy leaps deep in the money and sell covered calls on them which cost way less for 12 contracts?
@JakeBroe
2 жыл бұрын
I personally do not like the poor man's covered call option strategy, which is what you are describing.
@andre-le-bone-aparte
2 жыл бұрын
Hope you bought some puts in January!
@danielmocsny5066
2 жыл бұрын
As you mention, you're competing against the finance shops who hire four-sigma math and physics whizzes (i.e. people who scored four standard deviations above the mean in standardized tests like the SAT, GRE, etc.) from elite schools to write their algorithms. As the algorithms keep learning about the market, they're also learning about any trading strategy you use. In the zero sum game of trading it's like trying to beat a chess program that gets better at playing chess every year. Sooner or later the algorithms will learn how to defeat whatever strategy is making money for someone else. The more people who use the WHEEL or any other defined method, the more they attract the attention of algorithms as a potential source of profit to exploit. Any fixed and therefore predictable trading strategy that works to beat the average market yield will eventually become a victim of its own success. So, happy trading while it lasts, but if you plan to be retired for a long time it may be hard to sustain such a high monthly spend on capital. A (very) conservative strategy is to try to spend no more than 3% of your capital per year. So if you want to consume $6k/month you need capital of about ($6K*12)/0.03 = $2.4M, which should be largely immune to taxes, inflation, and market fluctuations. That makes it harder for the algorithms to figure out how to eat your lunch but they will try. Of course if your annual net gains are higher than 3% then you can increase your monthly spend in absolute dollars to keep it at 3% of your increasing capital. Thus if a strategy turns out to be "too" conservative then you have more money to spend later, or leave as a legacy when you die.
@user-so7ie4qz1z
Жыл бұрын
When this video was made Jan 23 2022, the VIX was ~30, and today it's about half that. Option prices are highly influenced by volatility (VIX), and today the SPY is at ~416, while the VIX is only ~18%, so the same option strategy will only produce about 5k/month, at the money. I am enjoying Jake's videos, but options are complex, be careful. Jake's video on Pin Risk is great advice - required watching if you're thinking of trading options.
@kmoney00769
8 ай бұрын
Thanks. Never heard of Pin Risk
@Putseller100
6 ай бұрын
You aren't kidding on that. Just for fun I looked up premiums as of now (4-1-24) and even with SPY almost 100 higher than in the video you would need to go out 88 days in expiration to receive 11$ like Jake shows. So now basically 4 months out where as Jake was showing 1 month out. That is an insane difference.
@NoName40460
5 күн бұрын
yeah, just checked (9/24)... def not the same.
@RandyLy
2 жыл бұрын
YES! This is the strategy I've been implementing. What I do is sell a put and use that premium to buy shares of SPY. If assigned the put, then I sell a covered call at the exact same strike price I got assigned. Then I use that same premium to buy more shares of SPY. If assigned the call, then it is as if I just held onto the stock and am leftover with the exact same amount that I can sell the put for. The only bad thing is that I might have to play catch up if the stock goes up too high, but that's where the shares of SPY I bought using the premium come in handy.
@holysmokes6709
2 жыл бұрын
Spy is a hard one to get the capital to write puts for I keep the premium in cash and wait until Monday to decide what to do with it. I might not have enough capital to write a spy put but I can write puts on other stocks in the meantime.
@DieWolf57
2 жыл бұрын
What will You do if the price for SPY goes further down and You had to pay the strike price ? At what strike price do You think You will be able to sell the covered calls ? Surely far less than You paid. To make Things easier: Current price for share X is 100 USD. You sell puts at a strike of 90 USD. The price crashes to 80 and You will have to buy at 90 USD. There is no way You will sell a call at a strike of 90 USD. I really like Jake - but if the wheel would work as promised why should Jake continue to make videos at all ?
@sithcat7025
2 жыл бұрын
@@DieWolf57 Because he doesn't have $437,000 cash yet to invest?
@nervosa68
Жыл бұрын
Thank you for sharing. I find it difficult to understand anything macro economic / financial. You have presented this information well and i think im getting it. Ty.
@ForEverWarrior
Жыл бұрын
@@DieWolf57 use 15-20% of the premium earned to buy a put and protect down side risk to an extent. this is called a "collar". e.g., SPY is 400, you sold covered call at 401 strike and collected $8 in premium with 30 DTE. now buy a put at strike 380 (just an example) and pay premium of $1.5 for eg. your loss is capped at $20 while you make $8 in premium.
@JeremyTheApe
Жыл бұрын
Great video Jake! I've been doing this strategy for a while. It would be brilliant if you did a year end summary if you kept going with this for 2022. My guess is with strike selection further out of the money it would have basically been a push, as with SPY down 20% YTD most strike selections would have meant the declining market would have cancelled out the premium collected. (Or quite likely gone negative) How to use this strategy in bear markets like we're in now would be another useful video. For instance timing put sales with when we hit lower lows of the downtrend, DTE / expiry selection, trade management / rolling ideas, etc. Keep up the great work!
@mcgragor1
2 жыл бұрын
That's all great, but do a scenario where you bought your 10 cash secured puts right before the crash of 2020, and tell the investor what to do in that instance. Someone else made a similar comment and I gave my input below, so maybe you will see one of these and comment. Thanks
@citizenm9590
2 жыл бұрын
I had same question cashed secured put risk in a crash situation buying right before market crash. Is it safe to say covered call is a better play then covered call minimize the risk?
@IPx3_Broken
Ай бұрын
i'm glad you mentioned reinvesting to lower your cost basis. people forget to do this, then the stock ends up going down and down and the premiums they would receive at their existing cost basis would be too low for this to work.
@IPx3_Broken
Ай бұрын
then they try to sell calls at a strike below their cost basis and end up losing money when they get assigned! don't be that guy
@maguchka1952
2 жыл бұрын
Good video, but I have one problem with it. What will you do if price will go 10% below your put strike? What strike you will choose for covered call? below price of assignment or at that price? Because if you get into bear market and you get assigned the price for call at assigned price will be much lower than 2.4% month
@BilalInSanDiego
Жыл бұрын
How's it going? Where are you now money-wise?
@justicelee26
2 жыл бұрын
The problem is when the underlying drops massively in value while you own it you can no longer get the premiums you need at any strike above your cost basis. So now you either sell a covered call below you cost basis or sell one way out of the money for very little premium. This strategy is nice until the market starts making massive moves.
@GilbertFleming
2 жыл бұрын
I guess this is why Jake is saying only buy stocks that you want to own. I’m going to own spa anyway
@chrisgallon3037
Жыл бұрын
I would use SPY or QQQ. More expirations and moving not as great movement on bad or good days
@Raevsky78
Жыл бұрын
Precisely. Good luck selling CC on a paper that dropped 30-40 points. You can of course try and collect pennies in front of a steamroller…
@wyatthale555
Жыл бұрын
Well you can always hedge your holdings by buying puts or selling call spreads on indexes if market conditions aren't bullish. Thats what I do
@shawnd567
Жыл бұрын
Sure but then you hold and sell CSPs to recover. You can then lower your cost basis and start selling CC again.
@JustinVConroy
2 жыл бұрын
Solid strategy. I know several folks with with a lot more experience and capital than either of us who have been doing this for over a decade. Not exactly as you describe ($500k, SPY, etc) but same basic concept. Can't remember the last time any of those folks pulled money from their 401k or IRAs except for RMDs. Most of them are just living off premiums from selling CCs.
@scottwilly86
2 жыл бұрын
do you happen to know what they do if the price takes off? just pull money out of their 401k/IRA to cover the increased capital required to sell another put?
@citizenm9590
2 жыл бұрын
@@scottwilly86 i don't think they are selling put they are doing covered call
@ChaosAI24
8 ай бұрын
You should make another channel for trading, I follow you for Ukraine for about an year and now tube recommended this. I was surprised you are into!
@luckyc3926
2 жыл бұрын
People act like this is riskier than going to work everyday for 45 years. Funny........
@JakeBroe
2 жыл бұрын
lol
@Kk-iw4ck
2 жыл бұрын
😂😂😂
@zp1191
2 жыл бұрын
So what if on your first go at this you sell 10 puts at 437 for example and spy tanks. Your account is at 11000 for the premium you collected but now you just lost more than 11000 so you can't buy the puts back at expiration because you need more than 11k. I thought you'd have to put up collateral in case this happens so in theory you couldn't sell 10 puts with 437k
@kennethkyle8771
2 жыл бұрын
You wouldnt buy them back youd just get assigned and buy the 1000 shares of spy.
@TR-lh9yz
2 жыл бұрын
@@kennethkyle8771 Yes, you end up buying the stock at the put strike which is above market and lose a ton of money.
@kennethkyle8771
2 жыл бұрын
@@TR-lh9yz you’d subtract the premium you were paid giving you your break even price and sell covered calls above that price. Holding shares of spy obviously gives you risk. If you have a plan saying you’d buy spy at x price why wouldn’t you sell puts? You were going to buy shares regardless.
@TR-lh9yz
2 жыл бұрын
@@kennethkyle8771 That's true, on the covered call part of the strategy, your risk comes from the stock not the short call. But the guy that made this video claims that there's no risk in selling a naked put, which is not true at all. For a short term trader, there's no reason to ever do a covered call or short put. Much better off selling a put spread and having an actual hedge for the downside risk.
@Pieter2360
2 жыл бұрын
This is a nice strategy that I’m also using with a small part of my portfolio. One thing to point out are taxes, and especially stamp duties or some other for of transaction-triggered tax if you’re a resident of a jurisdiction where such taxes apply. As the wheel strategy potentially results in frequent purchases/sales transactions of shares, these stamp duties really can add up quickly, eating away a big chunk of the net premia received. For US based investors, please be aware of short term capital gains taxes which this strategy most likely triggers.
@UtahKent
8 ай бұрын
Running a wheel works. Be reasonable and patient. The best thing about the wheel and a long-term sideway stock is stock prices move cyclically. Thanks Jake.
@Vanya80151
2 жыл бұрын
If you are going to trade 10 options, you should time spread them so that your risk is more manageable if the market has a quick move.
@JakeBroe
2 жыл бұрын
You can do this if you like Ivan!
@azizmehdi
2 жыл бұрын
Hope you will make the video on explaining the strike price soon and how to pick the right one based on other factors… bullish, bearish market…. Thank you.
@JakeBroe
2 жыл бұрын
Hey Aziz! It's all mixed in with my buying and selling, but generally I always just go straight at the money when picking a strike.
@arnaldoleon1
11 ай бұрын
One problem with the assumption of 10% per year for future returns is that historically there are 20-year periods of 20% returns followed by 20-year periods of 0% return. Yes on average you're getting 10%, but timing is critical
@Chuckk12
2 жыл бұрын
You should let the nice people watching the downside to this strategy. Which is big drops in price after you sell put. Then can’t sell a call to get back to even. And the potential if you do sell call ATM after fall to see stock run hard leaving you at a loss. The 30% return on paper looks that way for a reason, There is risk involved. Be careful folks.
@nicolapansini5656
2 жыл бұрын
You're absolutely right. There are risks involved as we saw since the time he made this video spy plunged. The key for me is to use this strategy on weeklies and on good companies
@Truck--kun
2 жыл бұрын
For those with less funds would you say IWM is a good substitute for SPY? Mainly asking bc I have enough for 1 CSP of IWM and was thing of wheeling it until I get enough funds to upgrade to QQQ, and then SPY ifI snowball up to it
@edod2997
2 жыл бұрын
Nice video. It's really all material you've covered in other videos, but it becomes more clear when the focus is on the retirement strategy. I'm definitely looking into this. Do you think this strategy would be good in a Roth as an account builder rather than income?
@JakeBroe
2 жыл бұрын
Thanks edod! Yes, as soon as I roll my TSP (gov 401K) in to my IRA I plan on doing this.
@mikeyiorio1880
2 жыл бұрын
Thanks for the video Jake! Would be sick to even show you doing this once a month and more so applying what you do (more visual learners) but I agree, looks like a great strategy especially when you can reinvest half the profit
@JakeBroe
2 жыл бұрын
Not a bad idea Mikey! I can think about this!
@squarebaga116
2 жыл бұрын
Thanks for the sharing. But if the SPY goes down quickly you won't be able to sell covered call with high premium. If it keeps going down, the premium is getting less and less.
@andis9076
2 жыл бұрын
Everytime stock crash, the call value is getting crushed so you've huge lost from holding 437K of stocks plus you can't sell call without loosing amount of money ! Basically this wheel works when stock AND market is stable.
@CSPare_CChange
2 жыл бұрын
Right, so you just wait for a recovery. Don't force the wheel. The only underlying you should wheel on its something you mind owning. A lot of bad stuff has to happen if SPY goes to $0
@kevincarrigan2798
2 жыл бұрын
@@CSPare_CChange yeah and most people who do this strategy have plans for when things go bad. They also tend to notice a crash a little sooner than the average Joe.
@cryptoenthusiast4999
2 жыл бұрын
@@CSPare_CChange Exactly!
@sparth1989
2 жыл бұрын
you can still get high premium as long as you choose ATM strike no matter how low a stock dips
@rakshere
2 жыл бұрын
Correct me if i m wrong: what happens in the below scenario? Lets say one has sold a cash secured put as the first step and it got exercised because the market was going down. By the time the shares are assigned, if the market is still going down, the value of the original capital will be less than the put strike price, so you are already in loss (unrealized loss). The second step is to sell calls, however since the market is in downtrend, if you sell a covered call with a strike price below the original cash secured put strike price and (again unfortunately) if that gets executed, you are realizing a loss on your capital (minus the two premiums that you received). Or, is it always recommended in the second step to sell calls with a strike price of equal or more than the strike price of the cash secured put strike price, just so that you will preserve your capital?
@TR-lh9yz
2 жыл бұрын
Exactly. This is a terrible strategy and your example shows that well. If you sell a put and the market drops below it, you could lose a ton of money. You have no downside protection on a short put, it's unlimited risk
@rakshere
2 жыл бұрын
@@TR-lh9yz right, thats what i thought. this might be good when the market is already in a correction mode, say when the SandP is already corrected like 15%, then one may sell put and the downside risk is lower
@TR-lh9yz
2 жыл бұрын
@@rakshere No matter what, if you want to sell a put you are always better off also buying another put further out of the money to spread off the downside risk. Much safer, better capital/margin efficiency. You'll sleep better at night. The guy who does this channel doesn't understand options at all.
@TR-lh9yz
2 жыл бұрын
@@adamwright9381 Not surprising. There are so many things in the video that are simply not true. He doesn't understand options at all.
@guillermocrespo8144
2 жыл бұрын
@@TR-lh9yz Risk is as if you own the stock. Going to zero. Unlimited risk is selling a naked call. That is if your broker wouldn’t liquidate the position quick enough,,,
@brusk3978
2 жыл бұрын
The first minute of this video is what I told my family after telling them over and over but non of them listen… “I’m not trying to convince you I’m just gonna show you what I know…” Today I’m 37 retired and I’m also the youngest of my siblings…
@JohnBaker-jj5tx
Жыл бұрын
I’m guessing you’re not really retired in the traditional sense though? Ok, you don’t work for someone else, but you still need to ‘work’ by constantly managing your funds to hopefully produce an income and if you have a bad run you’ll need to find work or sell assets, so no, not really ‘retired’.
@mohamedha578
2 жыл бұрын
Great video as usual, but I have a point, you should buy and sell far from ATM Because high move up or down will cost you a lot capital , less returns but more safe I have subscribed to your channel 🙏🌹
@JakeBroe
2 жыл бұрын
Welcome to the channel Mohamedha! Great to have you with us!
@andis9076
2 жыл бұрын
@mohamedha578 Why high move UP cost a lot of capital ?
@skydouglas996
2 жыл бұрын
How is this strategy working this year with the SPY down 20% in 6 months?
@memefaker9065
2 жыл бұрын
Tried backtesting with 1 option of SPY starting 1/1/2022 and trading option for last day of month each month @ +/- $10 strike of price on 1st of month. Ended up with -$4,156 or -8.96% which destroys the alternative of investing the $47,496 (SPY price on 1/1/2022 x100 shares) and ending at $38,423 today for a whopping $9,073 loss or -19.10%. Would have been assigned put contract on 1/31/2022 @ -$1,090. Then you'd end up selling shares on 3/31/2022 @ -$782.00. Then you'd be assigned put contract again on 4/29/2022 @ -$3,782. In May, June, and July your covered calls would make $1,927 while you shares decreased in value by about $2,777.
@zp1191
2 жыл бұрын
So if for example you sell a put at 430 and it goes to 425 at expiration you get assigned, I get that, but you also lose on the put you sold as well correct? So you collect premium but the put you sold puts you at a net loss
@RandyLy
2 жыл бұрын
You collect the premium the same day you sold the put. Once you get assigned and are forced to buy the stock at $430, you are technically down $500 because the current price is $425. But the stock can go back up to $430 the next week, so you aren't always going to lose once you get assigned. You keep the 100 stocks and can just wait it out until it goes back up.
@zp1191
2 жыл бұрын
@@RandyLy ya I get all that you said but the put itself let's say is negative 1000 or whatever it might. So getting assigned I get but the value of the put is now negative quite a bit don't you lose on that in addition to getting the 100 shares? So a double loss?
@craigchambers4183
2 жыл бұрын
Yes. You have to buy it at $430 and if you were to immediately sell it you would lose $500 (100 shares x $5) yet would also have had the premium offset that, so not as much. But the point would be that you should begin to sell covered calls to collect that premium, and if you want you could sell it at $430 and when/if SPY closes back above that at expiration you've made another premium and your stock was called away. Then, repeat.
@TR-lh9yz
2 жыл бұрын
Your attempt at explaining risk is way off. Selling an option has UNLIMITED downside risk and capped upside potential. Buying an option had limited/defined risk and unlimited upside potential. If you think you are making 6k per month indefinitely with no risk, you have lost your mind.
@JakeBroe
2 жыл бұрын
"Selling an option has UNLIMITED downside risk"
@TR-lh9yz
2 жыл бұрын
@@JakeBroe Now you're just being stupid. What I mean by that is the naked short call is not a risk-free or low risk position as your video says it is. If the SP500 drops 5% in the month you sold the call, this strategy isn't making any money. If it drops more than that, it's a loss and potentially a big one. Covered calls and short puts are unhedged positions. You shouldn't be encouraging newbies to run out and bet their retirement money on risky strategies. If you don't understand options trading, you shouldn't make videos about it.
@aaronsdecker
2 жыл бұрын
Hey Jake, I like this strategy. Just read through most of the comments. I would say more than half of people think you can’t make this work. I look forward to watching you make this happen. Keep up the good work.
@wealthelife
2 жыл бұрын
It would nice to see what would have happened if Jake had implemented this in Jan with the $100K or so he had in his trading account. SPY dropped to $366 in June, so would be nice to see how the actual income streams and capital value would have worked out this year. Instead Jake shorted the QQQ when it was dropping (probably hoping to reach his $437K retirement goal as the world plunged into recession and the QQQ tanked), and then lost (on paper) a lot when QQQ rose for a while (not sure how his position ended up as he was going to close out if it dropped a bit before expiry date, and the market did drop, but then rebounded again -- Jake seems to be focussing only on his Ukraine war vids these days.) A back-test of how this would have worked out over a 2+ year period if started off in Jan 2000, Jan 2008, Jan 2020 or Jan 2022 would be interesting.
@nervosa68
Жыл бұрын
Ditto on that..and all the little steps inbetween.
@jeffha4057
2 жыл бұрын
This works if the market remains static, which it never does. If it goes up too much, you need more capital in order to be able to sell 10 CSPs. For instance, SPY was close to 480 recently, so 437,000 wouldn't have been enough to cover 10 contracts. It also doesn't work if the underlying ETF drops too much, because then you are just forced to hold your shares and either attempt to sell CCs at a lower strike or sell at a higher strike and get less premiums. Your examples are good for one month, but it would be fascinating to see how this plays out over a year with real examples. Thanks for the video, as it's a more realistic way to "retire early" than the people who are delusional enough to think they'll ever have enough capital to live off dividend income. I've been selling options for awhile, and it's really only been a problem when the underlying stock falls too much, and then I'm forced to either take the loss or try to sell calls at lower premiums, while hoping that the stock recovers. At least you know SPY will recover at some point.
@GilbertFleming
2 жыл бұрын
Would mutual fund prices be more stable than individual stocks?
@reelhawksstudio
2 жыл бұрын
Buy more shares if it's too low, it'll reduce your cost basis.
@hankking4878
2 жыл бұрын
I agree with what you say here this does not work the way he explains it. If it's static yes it will work but it's not prices fluctuate up and down if it's down then you're forced to sell at a price lower than your basis.
@andis9076
2 жыл бұрын
@@hankking4878 That's true. He should expose the risk if holding $437,000 when the market crashing like right now.
@rpuggal
2 жыл бұрын
@@andis9076 the risk is no different than if you were just holding spy shares and not doing the wheel on it. He's assuming that the price will never move lmao which is totally untrue. The example in the video is too simplistic and should be talking about selling spy puts at a certain Delta regardless of price and same for the call side. As the price goes up you need more doller to run the wheel or reduce number of contracts sold. The video is way too simplistic and looks like he's never done the wheel himself lmao and just found out about it 5 mins before making this video.
@gustavtheunholy6290
2 жыл бұрын
Interesting strategy. I see comments concerned over the price of SPY declining which as you say we're not bothered by, however, I see the problem as too much rise. Say you've got your $437k ready to go and you get assigned at $437 (collecting $6k towards living expenses, and $5k to be reinvested). You then sell a CC at $438, collecting the next month's expenses and another $5k to reinvest. But during this month, SPY goes up to $455. You have your sold SPY for $438k and have $10k of reinvestments, but the cash needed to secure the put would be $455k. You would be short $7k. You could sell a put at a lower strike, but would receive a lesser premium, and therefore less to reinvest. It seems in a bull market, one would constantly be losing ground on your purchasing power to sell CSPs. Something to consider, I suppose. Love the videos, Jake. Thanks.
@art_without_borders
2 жыл бұрын
I have exactly the same concern. Wheeling is better for the stocks like AMAT which is channelling. SPY is usually goes up unless it plummets. If you sell CC with the strike price 438 on the SPY that is 437 today, in 26 days it will be higher than $438, most likely. So, in 26 days, (actually sooner) not only you would be better off if you didn't have the CC, you wouldn't be able to restore 1,000 shares of SPY, as by that time the price of SPY will be too high.
@cleaner1984
2 жыл бұрын
Very interesting point! One thing though, if the price of SPY goes up from $438 to $455 like in your scenario, yes the cash needed to secure the new puts would be much higher ($455k). But the premium you would receive for these CSPs at this strike price would also increase a lot so you would probably make up for the increase in cash needed to secure puts (provided your capital can still let you afford to sell the same amount of Options contracts).
@onatski
2 жыл бұрын
on a margin account, you would only need less than 10k to sell a naked put on SPY and you only need less than 25k if you do get assigned shares.. i do not recommend this if you don't have the full amount to cover but in your scenario, it would work in a margin account..
@buckjohnson8360
2 жыл бұрын
Or maybe you would have to sell one less contract
@62orbetter33
2 жыл бұрын
Just to let you know, I opened to sell a cash secured PUT. expired feb 18 and I earned $1078. I'm thinking of doing this again. Since times are shaky (war in Europe? Fed raising interest rates? etc) Would it be less risky to invest in 2 week Puts instead of 4 week puts?
@GilbertFleming
2 жыл бұрын
Hi Jake. You did this video six months ago. It got a lot of attention. But a lot of attention from me! I wonder how this strategy has worked out over the last six months in a down market? I know that this is a years long process. It goes up it goes down you win you lose. What has been a performance
@JakeBroe
2 жыл бұрын
Hey Gilbert! Over the last 6 months, the market has pretty much just gone down. So if someone was holding SPY long term (because they wanted to anyways), then they would have been making money off of their covered calls. I have 200 shares of SPY in my Fidelity account and I have successfully sold to open and bought to close some covered calls on them. But my shares of SPY are down 15% for the year... so this is a long term strategy and the last 6 months might not have been normal.
@GilbertFleming
2 жыл бұрын
@@JakeBroe And they did not get called away? I lost or I mean I was assigned out of my account 200 shares. I don’t know if I should just re-buy the shares? Or start selling puts?
@ForGodsGlory70
2 жыл бұрын
Been doing something similar, but need to come up with a "system" and this is great inspiration. Your videos are always good and helpful. Thank you Jake!
@JakeBroe
2 жыл бұрын
Thanks Summer! You definitely have to have a set of rules you can follow and remain objective. Months like the one we are having right now is enough to scare most people away from this kind of strategy, but a month like this is an exception, not the norm.
@sk510sk
2 жыл бұрын
@@JakeBroe Just started with NVDA covered call and selling cash secured put. It has worked in this down market as well. I am a long term holder of NVDA, so I follow the stock closely.
@stevensaxon8888
Жыл бұрын
@@JakeBroe just found your channel today & watch this video. What are some stocks for a small account say under 5k? Any $5-20/share stocks for cash secured puts or covered calls?
@kbuzz9607
2 жыл бұрын
Can you update on how you handled spy downed to low 400 now. Were you assigned, or rolled out? How did you sell covered calls now if did get assigned at that high?
@Erdbeerschorsch2011
5 ай бұрын
If the stock market tanks, you're not going to see any noteworthy options premiums for possibly multiple years, only dividends. So, if you need $6000 per month and you wanna have a safety buffer of 2 years (which seems reasonable to me) then you need $6000 * 24 = $144000 more in capital, that you're not using to sell CSPs on.
@cleaner1984
2 жыл бұрын
Great strategy Jake! I know this is nightmare scenario but... what would happen if the stock market crashes and SPY goes back to $337 (pre-covid high) and you've sold 10 cash-secured puts at $437 or a little less? I guess, it would take a long time to recover (I know it's just one stock but we've just witnessed NFLX losing $100 overnight). In my catastrophic scenario here, you would have to spend $437K to buy something that is now worth $337K, so a loss of $100K in account value. Even if you continue to sell CCs after that, the premiums you would get for it would be really lowered. Also, you would still have to pay taxes on all the premiums you collected during the tax year although you have lost $100K in account value during the same year which doesn't even count as Capital gain loss if I'm correct!
@isambo400
2 жыл бұрын
Yep that is the problem with taxable accounts and trading options
@kanegs1
2 жыл бұрын
So BTW, all this can be done in a IRA. There is the option (no pun) to 'Roll' your position (down and out, in this case). Or as you mention, sell calls against it, typically at the 15-20 delta so as not to get assigned, to capture additional premium and lower your cost base as you crawl back from the downturn. Just a couple of 'maintenance' techniques to employ when trading options. Additionally paying attention to the overall market, maybe not going 'all in' initially and holding back some capital for this type of scenario, to then 'double down' and wheel in some more. Many ways to skin the cat with options.
@mcgragor1
2 жыл бұрын
Odds of that happening in 1 month would be rare, but if things start to get scary, you could always buy back the option, for a loss of course, but a lot less than holding into infinity. A year like last year, what he is saying probably would have worked great, but in a volatile year, think 2020 in March down 30% in 1 month, and your scenario would have played out, but again, that doesn't happen usually, but obviously it can happen. Another way to help protect is to sell out of the money, give yourself some cushion, but of course the premiums won't be as good, but instead his 37% scenario, shoot for 15 or 20%. By giving a cushion of 5-10% it would in most cases keep you safe and in a really bad case, keep your losses maybe in the 20% range or less, especially if you buy it back. I may be missing something, only been trading options for a bout a year, so maybe he will see your comment and mine and chime in.
@twr243
2 жыл бұрын
You can close your options early. Or roll them.
@sreke77
2 жыл бұрын
I agree with Mcgragor .. I have been doing this , works like a charm. I give a cushion of 5% when selling puts , so a 10% drop does not hurt me as much when I have to do sell call after its assignment. A 30% drop takes 6 to 12 months to come back - just hold onto your shares . Never sell assigned shares for a loss . The key is to Not panic and enjoy the ride ! That's how you become a millionaire. Over a 10 year period you would have made an average of 15% to 20% per year on your capital which otherwise you would have lost to inflation anyways. Remember to do this wheel strategy with 'excess cash' after setting aside money for index fund investments in brokerage account & IRAs and even better if you have cleared your home mortgage or student debts if any, and ofcourse after setting aside emergency expenses. Then, you are least anxious about locking in a huge capital on a 30% market drop. Also when I do the wheel, I only do it on SPY and not on individual stocks , since the recovery time for SPY on major crash is the fastest compared to individual stocks . Hope that helps!
@loukramer152
5 ай бұрын
Jake, I was wondering if you have back tested this wheel strategy on the S&P 500 to see if your gains would have outperformed a buy and hold strategy? The fact that you can get approximately 37% compared to ~10+% for buy and hold suggest there is some additional risk not being factored into the equation.
@AmericanConstellation
2 жыл бұрын
Not too many young people make this kind of money. They all have huge debt. Student loans a 400K house, and a BMW and Inifinti SUV that they can't afford. This guys a joke. 99% of the people in this country can't even afford what I just described up top.
@Nix4me
2 жыл бұрын
The wheel falls apart when you own the 100 shares at say 450 a share, sell the call at 451 and it falls to 430. Then you sell call at 451 again??? - if so then you get real crap premium. If you sell call at 430 and shares get called away, then you just lost 20 per share.
@czarwill
Жыл бұрын
Sorry, gave up on those sort of options at all to include cell phones, mortgages, TV, carpet, wearing socks, using natural gas, needing to use an auto more than once a week or two. But, thank you no. My mantra since Bush 1 and the collapse of the Berlin Wall is... "I don't want what you have!" Goal is $400 a month and perhaps $300. No kids, no wife, keep income below $12K to keep medicaid. Own lands and no home nor stocks. Weakness in my plan is access to water in next ten years due to global drying. No sales tax in Montana.
@marlalama4513
2 жыл бұрын
The more I watch your videos the more I understand options, thanks Jake, love your teaching. I am just amazed how calm you are while everybody in youtube is going crazy and dreading the next few days.
@JakeBroe
2 жыл бұрын
Haha, thanks Marla! The best traders are the ones who can control their emotions and remain objective. I try to remember this before I open up my computer for the day. Cheers!
@BM-ub9gh
Жыл бұрын
@@JakeBroeI collect smart quotes from famous minds and I’m adding this one to my collection: ”The best traders are the ones who can control their emotions and remain objective.” JakeBroe, THE smart man of KZitem
@deviambati3805
2 жыл бұрын
Hello Jake, an interesting video and inspired to try out with 1 contract. Let us see how the market goes next few days - hope for the best. Good luck to everyone. Thank you for a detailed video.
@JakeBroe
2 жыл бұрын
Thanks for watching Devi! Cheers!
@GilbertFleming
2 жыл бұрын
Yes I’m saying thinking the same thing I wanna try with one contract. I am over 59 1/2 and I have money in my Roth. If I can make this work on my Roth it would be fantastic
@kanegs1
2 жыл бұрын
@@GilbertFleming Especially now with the drop in the market, Put premiums are inflated. the 20 delta put for this friday pays $2.20-ish !
@wernerschonenberger7668
2 жыл бұрын
Sorry but you're being too simplicistic: premiums vary depending on IV and day the contract was sold, market corrections hurt ATM options sellers pretty rough ... please show the backtest!
@benjaminbabick4050
2 жыл бұрын
I hope no one is thinking of doing this. This is VERY RISKY strategy. Once the market crashes ur done. Let's see if Mr. Broe is still making wheel strategy videos after the next crash.😂
@mountainmoments
Жыл бұрын
98% (roughly) of all human beeings never have this amount of money. Your strategy is still very risky. Nobody knows what tomorrow will happen, so, be aware of the risk of loosing all. More likely can be a 20-30% loss. With one trade only. This is gambling, not investing. Investing e.g. is building up a YT channel.
@InfoRanker
2 жыл бұрын
The only time I ever made money with options was covered call on SPY. I would avoid options overall. A simpler method would be to just buy something like JEPI which does all the work for you.
@hgrandhige
5 ай бұрын
In another of your videos you recommend exiting an options contract before expiration. I believe that was on Vertical spreads. So in this strategy, I'm assuming you always hold to expiration? Or would you ever close the position early?
@ginza1422
6 ай бұрын
A question for options experts in here… selling close to at the money PUTS to get higher premium. Is it possible that if SPY goes a little under the strike price, you may get assigned any time? or yiu only get assigbed at expiration when SPY is under stock price? Also, if you get assigned sooner than expiration, you dont get the entire premium right? just partial premium?
@alondob
2 жыл бұрын
Great video! This is precisely what I’m trying to do. I’m targeting 3 more years to reach $439K in my trading account.
@JakeBroe
2 жыл бұрын
Solid plan Alondo!
@Zackarysmackary
2 ай бұрын
That’s not enough money. When you become 80 years old, you are going to face the same problem many seniors face today - having to work a second job because their savings weren’t enough to maintain inflation and prices slowly rising over time
@xavierdoisneau3472
8 ай бұрын
To gain additional income, brokers will allow you to invest the buying power for cash secured puts in Money Market Funds to get an additional 5% return. However when you do get assigned, you will need to liquidate the fund to buy the shares. You do not need margin to do this
@fabsnuffy1283
2 жыл бұрын
It is Sept 22nd & SPY is 377.55. I still enjoy this video, but it's been a very bad month to be bullish ~ or even neutral ~ on SPY.
@marcmini8137
28 күн бұрын
iv been doing this for 5 years. trust me 38% is not realistic. 15-20% is much more realistic as when stocks crash ull be sitting on ur hands or dancing under ur cost basis
@michaelal20
2 жыл бұрын
One day when I have my debt in check I’ll be looking through all of jakes videos to learn all of these complicated things I don’t know about.
@JakeBroe
2 жыл бұрын
Solid plan Mike! No worries, these videos aren't going anywhere!
@zaklloyd4335
Жыл бұрын
this is a fascinating strategy and something I'm really interested in doing. However, I don't have access to Stocks, just crypto, namely Bitcoin and Ethereum options, and these are cash settled European style. How would this work with such a scenario?
@jiti5034
Ай бұрын
AFter first assignment if the underlying tanks ? and no you dont have more money to DCA , then what every you tuber promoting this strategy avoids talking about the huge risk
@John-sb7pn
6 ай бұрын
That portfolio is too small to do this long term. If the market goes against you and/or IV drops, you're screwed. Works until it doesn't.
@SuperFS11
2 жыл бұрын
Need to watch it again to fully grasp it. I think um good with calls not sure about puts. Didn’t realize you sell puts. Is the danger of a put the fact that the stock really tank and you now have to buy it a higher price?
@huskydeal
2 жыл бұрын
You have been my favorite channel to learn about investing. With your explanation everything make more sense. Thank you for doing such a good job. Wish you well!
@JakeBroe
2 жыл бұрын
Thanks Husky Deal! I appreciate that!
@garrettcollins4968
Жыл бұрын
curious how this strategy is going for you in today's market, and since September 2022?
@LMF-ct4lt
10 ай бұрын
Would it make sense to trade between 3 to 5 different stocks? The chance of all of them dropping below you cost basis is much lower.
@Cognosapien
2 жыл бұрын
Great video as usual. Thanks for explaining why anyone would buy your covered call. It seems like easy money to sell covered calls, so I was confused about why anyone would buy. If you're making easy money, somebody must be losing easy money. Wouldn't it make sense to invest in a leveraged ETF that just sells covered calls for me? Or do those not exist for some reason?
@UncleDanMoney
2 жыл бұрын
Leveraged ETFs buy daily options and suffer from high theta. Never buy those long term. Go look at a ten year chart. Selling covered calls after you have lost on your puts and got assigned is just locking in losses. Won’t help you retire.
@nicolapansini5656
2 жыл бұрын
Thinking about that now that spy went down so much. But the beauty of it is that even if you own spy today at above 400$ you can still make decent money selling cc on green days
@Artome001
2 жыл бұрын
Observations: Selling at the money calls increases your chances of being assigned, which has bad tax consequences (short term gains VS LT Capital gains). The better idea is to never get assigned by simply rolling the options, after all you are holding the underlying as a LT investment. That generally results in lower option premium income when the rolling occurs (but the extra $$ is actually locked up as an unrealized capital gain, which is OK). As Jake also pointed out the options premium income is taxed as regular income which will reduce the actual annualized return and land you a hefty tax bill at year end.
@zachnicholson7924
2 жыл бұрын
What if you keep rolling cash secured puts for a year without ever getting assigned? Will they be long term gains?
@freddybenelli9100
2 жыл бұрын
@@zachnicholson7924 No. Each time you roll to a new put contract, you are closing your previous position and entering a new one. The only way to get long-term capital gains treatment on this sort of trade is to hold a given contract longer than 1 year, which obviously isn't possible when they only have 1 month to expiration.
@TheSimArchitect
2 жыл бұрын
I have been trying to do this but the things I got (QQQ, PYPL etc) fell way too much and now I can't run the wheel without realizing losses. Do we just hold the stock/EFT until the market recovers when it happens?
@UncleDanMoney
2 жыл бұрын
That’s when the strategy fails. When the market keeps dropping. No retirement for you. Stay small and DCA over years and you will get it back.
@TheSimArchitect
2 жыл бұрын
@@UncleDanMoney Yay. Thanks. 😐 I guess I am holding what I have untouched now, since I don't see another way.
@shachopin
Жыл бұрын
what do you mean by saying "5160 is carried over to the breakeven price of my next trade"
@gabakusa
Жыл бұрын
is there a way that you can loose your $$?
@trinispur3787
Жыл бұрын
Jake, there seems to be a flaw in the strategy with regard to potential loss of capital if the particular stocks drops significantly whilst you sold a CSP. On CC’s any loss is just “potential” but you still would have to add capital to then sell another CSP. Have you done a video on the risks involved or would you consider doing one?
@OverTheCap10
2 жыл бұрын
Great video… thanks! It’s actually a quadruple income strategy. Don’t forget Dividends if you hold the stock!!!
@JakeBroe
2 жыл бұрын
Haha, you are right Josh! Nice catch!
@josephc5493
2 жыл бұрын
Interesting video. Does this scale longer term as the market rises? For example, let's say SPY rises 20% is now sitting at $525/share (your $437 example +20%). Now you don't have the capital to run 10 calls/puts per month, you can only do 8. Or do you think the option premiums at $525/share * 8 contracts will still generate the same amount of income?
@suncasa2224
2 жыл бұрын
This is pure crap in a down trending market. Don’t do it. It will blow up your account.
@ianwinegardner
2 жыл бұрын
Great video, Jake. I really like the wheel. I haven’t tried it yet but want to. It just seems too good to be true.
@JakeBroe
2 жыл бұрын
Haha, the deck is stacked in favor of options sellers. Unfortunately those are the people with all the money already...
@LalitDevraj
2 жыл бұрын
Jake, you're really, really good at explaining things/concepts etc; it's wild- keep it up as you always do :) Still can't believe how shocked I was to see you in the Graham Stephan testimonial for his YT course
@JakeBroe
2 жыл бұрын
Thanks Lalit! I'm in a testimonial for Graham's course? I didn't know that.
@LalitDevraj
2 жыл бұрын
@@JakeBroe Yupp, you, Jake Tran and a couple others- amazing to see how you literally grew so much with literally the consistency- big ups :)
@VijayMatlapudi
2 жыл бұрын
one condition i would add is...stay sidelines/ close positions when vix >20
@rpuggal
2 жыл бұрын
Why ? Selling premium when vol is elevated is the best time to do it. Vol is always mean reverting. Won't stay elevated for ever.
@johnnocanuck
2 жыл бұрын
Liked and subbed. This is the clearest explanation of the Wheel Strategy I've ever seen. By the way, the Wheel Strategy works in Canada, too!
@JakeBroe
2 жыл бұрын
Welcome to the channel John! Great to have you with the channel!
@yudhamica17
Жыл бұрын
If you haven't heard this yet, your videos are amazing. You're very easy to follow, the pacing of the video is great, the visuals are awesome. Thank you very much Sir.
@jamesjacob6841
2 жыл бұрын
Hey Jake, I keep loving your videos...I believe my investing trajectory has drastically been improved since I see the potential thru these relative safer options plays. Thanks so much!!
@JakeBroe
2 жыл бұрын
You are very welcome James! Cheers!
@Anne_Patel
2 жыл бұрын
Whats the best way I could invest 25k dollars in order to double it in 2-5 years?
@dvee1983
2 жыл бұрын
I have tried to do this for years on different stocks. Haven't had too much success. Do you always sell at the money or if assigned, do you always keep your short call above your purchase price minus any premiums received? The volatile markets make the premium great, but are hard to manage. Are you having success doing this? Thanks so much.
@msmith8141
2 жыл бұрын
Sounds like a good strategy. I'm curious what the risk is of the volume of buyers not being there to buy the contracts you're selling. This strategy would only work as long as someone buys the contract. How possible is it that there are just no buyers at the strike you are interested in?
@thomasd5488
2 жыл бұрын
You should be able to find a buyer. If there are no retail or institutional buyers for the options you want to sell, the Market Makers are there to keep the market liquid. If an option has poor open interest, or poor volume, you may not get the midpoint price between the bid and the ask, but you will get it sold. Personally, I stay away from poor open interest, poor volume options. There are many alternatives.
@msmith8141
2 жыл бұрын
Thanks for the reply, Thomas. Is there a threshold you use to determine a stock that has poor open interest/volume?
@thomasd5488
2 жыл бұрын
@@msmith8141 It is a little subjective. Generally speaking, the lower the option volume and open interest, the larger the spread between the bid and the ask price. My main goal when choosing an option, is to avoid a wide bid/ask spread. One time during the beginning of my trading experience, I once sold a put by mistake, on the wrong ticker. I sold the put at the mid point (half way) between the bid and the ask. When I realized I sold a put on the wrong ticker symbol, (fat fingers on the keyboard), I bought it back to close, right away. The stock price had not changed. Unfortunately, the spread between the bid and the ask was soo wide, that the mid price I sold the put for, was $0.50 The price I had to pay, to buy to close, was $1. So, instead of making $50, I lost $50. That was the cheapest education I ever got. On an option with a decent bid/ask spread, I should have only had to pay $0.60, or $60. Look at SPY, the most traded ETF available. You often see a 2%-3% spread between the bid and the ask price. And you can often get your sell price filled at the midpoint, or even a little above the midpoint. Hope this helps.
@frankalexander5401
2 жыл бұрын
I guess with my net worth in 8 figures, i can retire!!! 🤣🤣🤣🤣🤣🤣
@evraamgorgy1607
13 күн бұрын
Jake, have you looked into IWM wheel strategy?
@jeremydennis6988
Жыл бұрын
Good video Jake but I'm not very smart so you might have to dumb this down a little bit😅
@peteswartz5790
2 жыл бұрын
Wheel Strategy - GREAT IDEA - What do you do if you are assigned and the SPY drops say another 30 points - well below your cost basis. - The ATM cvrd cll for the next cycle still puts you below your C/b. Therefore, there would be a "net" loss. I'm doing this with LRCX and that is my situation. My C/B is 25 pts below the current price. TY
@jiti5034
Ай бұрын
This will not be answered
@MentholCiC
25 күн бұрын
@@jiti5034I was just literally asking chatgpt on that scenario and you have few options. 1) definitely do not sell covered call below what your strike price was 2) remember that you started entire strategy with belief that stock will be bullish in the long run Here are some options for you: Great question! In that situation, where you’re assigned at $99, and the stock price drops significantly to $85, it’s understandable that you wouldn’t want to sell a covered call close to the money (e.g., a strike near $85) because it would lock in a loss if the stock price rises and your shares are called away. Here’s how you might handle it: 1. Hold Off on Selling a Covered Call Immediately: Since you were assigned at $99 and the stock drops to $85, you’re sitting on an unrealized loss. Selling a covered call with a strike price near $85 would cap your upside and lock in those losses if the stock recovers. It might be best to wait for the stock price to recover or sell a higher strike price call. 2. Sell a Covered Call Above Your Purchase Price: If you’re confident the stock will eventually recover, you can sell a covered call with a strike price at or above your cost basis ($99). While the premium will be lower, you can still collect some income without locking in a loss. • For example, you could sell a $99 or $100 strike call. Even though the stock is at $85, selling a higher strike call gives you some premium without risking selling your shares at a loss. • If the stock recovers to $99 or above, you’ll sell your shares at breakeven or with a small profit, plus the premium you’ve collected. 3. Consider a Longer Expiration: • If the stock stays depressed, consider selling a longer-term covered call with a strike price above $99. This can give the stock time to recover and give you more premium than a short-term call. • By extending the expiration, you might receive a decent premium even with a higher strike, but you’ll be locking in your shares for a longer time. 4. Roll the Covered Call: • Another option is to roll the covered call if you’re in a scenario where it looks like the stock might recover slowly. You can sell a call at a higher strike or with a longer expiration and continue to collect premiums over time. 5. Wait It Out (If Necessary): • If you’re really confident in the stock’s long-term potential (like NVIDIA), you could simply hold your shares without selling any covered calls and wait for the price to recover before resuming the Wheel strategy. You might miss out on premium income in the short term, but it could avoid locking in a loss. Why Selling an In-the-Money Call Isn’t Ideal Here: If you sell a covered call near $85 (in the money), and the stock starts to recover, you’d risk having to sell your shares at a loss (if the stock hits $85 and your call gets exercised). Ideally, you’d only sell calls at or above your cost basis when you’re looking to avoid taking a loss. Key Takeaways: • Don’t sell a close in-the-money call if you’re trying to avoid locking in a loss. • Wait for a recovery or sell a call at a higher strike price (near your cost basis) for a lower premium. • Consider longer-term calls to collect more premium while waiting for a stock recovery. It’s all about balancing premium collection with managing risk, and in this case, patience might be your best ally.
@62orbetter33
2 жыл бұрын
Jake, if you were in the place where you were retired and you had $437,000 and you were investing in spy… Would you write any other options and other companies? Will you still play the option game with other stocks? Or would you stick to using the wheel strategy on spy?
@hl7843
2 жыл бұрын
When running the Wheel strategy, do you usually close the trade when you reach a certain profit amount, or do you typically let it run to expiration? Thank you
@thenewfire
Жыл бұрын
If you're over 60 or 70% profit amount, BTC. Lots of articles online about this. But the last 20% of the time of an option contract moves very flat compared to the first half. Use that time to your advantage. Try to double the amount of contracts you get to sell.
@John-iq2zt
Жыл бұрын
You can always buy back and roll over.
@zbayarea
2 жыл бұрын
committing 100% of investable cash to one trade is a big no no for most people let alone for someone who's planning to retire
@TopRetroCommercials
Жыл бұрын
i wish i wasn't paying state tax on short term capital gains but, Im in new york there is not breaks here.
@lucygoose6052
2 жыл бұрын
That was fun! Can u do that again on a smaller amount, say $200k
@62orbetter33
2 жыл бұрын
Jake I hope you can address this in your next Q and A? How would you change this video, if at all, given the current market conditions? In the video, SPY is at $437. But today, it is at $413. The warnings were that the S and P was at a high and declining. Would you skip the transation time? Or move ahead in the hopes that it would work out over time? I sold one put for April 29 for a strike price of $436. I bought to close and it cost me $1705, since SPY had declined to $390. What would be the pros and cons of holding on? I guess if I would have held on, I would have 100 shares at a loss ($436 - $413) of $23 per share?
@62orbetter33
2 жыл бұрын
Hello Jake. I’m reposting this, from two weeks ago, hoping that you’ll see it and that you will include it in your question and answer session that you’re gonna be working on. By the way, I sold a put option for SPY at $385. Well, it expired yesterday. And I’m the proud owner of 100 SPY shares that I’ve lost about $15 per share! How should I play this on the wheel strategy? Should I try to sell call options that are outside of the money. So I don’t lose my 100 shares. If I lost them now my paper loss would become a real loss!
@memefaker9065
2 жыл бұрын
@@62orbetter33 Tried backtesting with 1 option of SPY starting 1/1/2022 and trading option for last day of month each month @ +/- $10 strike of price on 1st of month. Ended up with -$4,156 or -8.96% which destroys the alternative of investing the $47,496 (SPY price on 1/1/2022 x100 shares) and ending at $38,423 today for a whopping $9,073 loss or -19.10%. Would have been assigned put contract on 1/31/2022 @ -$1,090. Then you'd end up selling shares on 3/31/2022 @ -$782.00. Then you'd be assigned put contract again on 4/29/2022 @ -$3,782. In May, June, and July your covered calls would make $1,927 while you shares decreased in value by about $2,777.
@memefaker9065
2 жыл бұрын
@@62orbetter33 Not financial advice: if I were doing this strategy, I'd sell on 1st of month for last of month option contract @ +$10 current price for call or -$10 current price for put (put if you don't own the stock). If market is crashing, you're likely to lose money, but nearly as much as if you had just bought and owned the stock.
@philochristos
10 ай бұрын
So, how do people lose money on the wheel strategy? There has to be a way to lose.
@bongbong1937
2 жыл бұрын
Noob. You totally ignored and disregarded the scenario when your put options are assigned and the stocks keep dropping. Sell a covered call? Sure. Then it drops again the next month. Now what? You just made someone sink from $437,000 to $240,000. Don’t teach incomplete steps just for your own convenience.
@chocolatecoveredgummybears
Жыл бұрын
he didn't ignore or disregard that scenario. in fact he talked about buying far otm ones in this video, just didn't want to go into it. lol learn to watch a video to its fullest..
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