Dan sits down with Market Taker Mentoring head coach John Kmiecik for a candid conversation about the Wheel strategy, what they’re seeing from real traders, and why a strategy that can sometimes feel “boring” may be exactly what many investors need. John shares how students are incorporating the Wheel into their portfolios, including traders with smaller accounts, and why the strategy can provide a very different experience from the constant ups and downs of swing trading.
Dan and John also dig into what makes the Wheel work, from the volatility risk premium and changing implied volatility environments to earnings opportunities and the realities of assignment. They discuss the psychology of watching a stock blow through a put or call strike, why missing some upside doesn't necessarily mean a trade went wrong, and how adopting an investor's mindset can make it easier to focus on the long-term process instead of trying to achieve a perfect outcome on every trade.
Key Topics
- How traders are using the Wheel in real-world portfolios
- Why the Wheel can work for smaller accounts
- The difference between the Wheel and higher-stress swing trading
- Why “boring” investing can be a good thing
- How the volatility risk premium helps drive the Wheel strategy
- Whether the Wheel still makes sense when implied volatility is low
- Active vs. passive approaches to selling option premium
- Using the Wheel around earnings announcements
- Why cash-secured puts have become one of Dan's favorite strategies
- Managing the psychology of assignment and missed upside
Key Takeaways
- Consistency can be more important than excitement. The Wheel may not deliver the immediate gratification of a successful swing trade, but its appeal comes from repeatedly executing a process and evaluating results over longer periods.
- Low volatility doesn't automatically eliminate Wheel opportunities. Premium may be less attractive when implied volatility is low, but Dan and John argue that investors can still evaluate each opportunity based on the available return, technical setup and their individual objectives.
- You should be comfortable owning the underlying stock. When starting with a cash-secured put, the possibility of assignment should be part of the plan not an unexpected consequence.
- Earnings can create richer option premiums, but they come with tradeoffs. Higher implied volatility around an earnings announcement can create opportunities, but investors still need to consider strike selection and whether they're willing to own the shares if assigned.
- Assignment isn't necessarily failure. If a cash-secured put is assigned above the stock's current market price, Dan frames it similarly to buying a long-term investment with a limit order and then watching the stock subsequently decline.
- Missing upside doesn't mean the covered call was a mistake. Stocks will occasionally move dramatically above a call strike. That's one possible outcome of a strategy designed to repeatedly collect option premium rather than capture every dollar of upside.
- Think in terms of the overall process. Some individual trades will underperform expectations. The objective isn't perfection; it's building a repeatable approach that can produce attractive results across many trades and market environments.
Connect
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For more information about subscriber-only articles, video training, monthly Ask Me Anything sessions, unusual options activity alerts, and access to Dan's real covered call and cash-secured put trades, visit https://wealthbuildingpodcast.com.
To learn more about Dan Passarelli, Market Taker Mentoring, and his book Build Consistent Wealth With Options, visit https://markettaker.com.
Disclosure:
Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD), which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document
Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.
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