The Wheel Strategy on Options - futures io
futures io



The Wheel Strategy on Options


Discussion in Options

Updated
      Top Posters
    1. looks_one PK007 with 35 posts (93 thanks)
    2. looks_two Mativen with 4 posts (6 thanks)
    3. looks_3 SMCJB with 3 posts (7 thanks)
    4. looks_4 Arch with 1 posts (1 thanks)
      Best Posters
    1. looks_one PK007 with 2.7 thanks per post
    2. looks_two SMCJB with 2.3 thanks per post
    3. looks_3 Symple with 2 thanks per post
    4. looks_4 Mativen with 1.5 thanks per post
    1. trending_up 8,336 views
    2. thumb_up 113 thanks given
    3. group 16 followers
    1. forum 46 posts
    2. attach_file 42 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 150,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

The Wheel Strategy on Options

(login for full post details)
  #11 (permalink)
 Mativen 
Los Angeles, CA/USA
 
Experience: None
Platform: NT, TOS, TS
Broker: TD, TS, NT
Trading: Futures, SPY, QQQ
 
Posts: 8 since Aug 2020
Thanks: 8 given, 11 received

Where did you trade MES for only $0.52? Thank you.

Reply With Quote
The following user says Thank You to Mativen for this post:

Can you help answer these questions
from other members on futures io?
Asking Wall Street Billionaire for Investment Advice
Psychology and Money Management
Finding the Lowest Price and its Location in a Variable …
ThinkOrSwim
Blackbird
Traders Hideout
NT 8 Order Flow
Emini and Emicro Index
IKYP - How I solved email troubles on VPS
NinjaTrader
 
Best Threads (Most Thanked)
in the last 7 days on futures io
1 Tick from the ES/Per day
21 thanks
What if a broker declare bankruptcy!!! Ftx first whose next?
14 thanks
HFT Algo: anyone doing HFT here?
8 thanks
commission
7 thanks
Inner Circle Trading
6 thanks
 
(login for full post details)
  #12 (permalink)
 Arch 
W.Coast, USA.
 
Experience: Intermediate
Platform: Anything
Trading: Emini
 
Posts: 267 since Jul 2017
Thanks: 87 given, 310 received


PK007 View Post
Now that I have more data, thought it might be a good idea to populate it on a chart.

Note, in order to show monthly numbers and not to make it too complicated, I will calculate the Profit/Loss and returns at the time when the last weekly option is closed for the month. This is to avoid trying to calculate realized/unrealized numbers exactly at the end of the month.

November in this case, is only until the 16th and will change as the month progresses.

Massive Disclaimer:

Being a qualified accountant myself, I know how easy it is to make financial results look better than what they really are. In this case, a 15.8% return looks too good to be true.
You must consider the following (I touched on it in my earlier post):
1. The return is only calculated on this one trade strategy using the margin requirement of 1 contract of the MES. It is extremely unlikely that you will put all your money into this one strategy. I definitely don't recommend it.
2. The wheel strategy WILL lose money if the underlying (in this case the MES) has a significant drop, lower than the short put strike and keeps on going lower. What is likely to happen in such a scenario is that I will get assigned and might not be able to sell covered calls, with reasonable premiums, but still a good distance away from the underlying price. This has happened to me before.

One of the main reasons to record the strategy in this journal, is for me to learn. Itís more an experiment and for others to join in and make recommendations on how to manage the strategy better. When I do get assigned eventually, there are a few different variations of the strategy that might be useful to explore. So, it will be useful to have everything documented.
I'm definitely not an expert in this strategy.


Yes, huge fat tail risk here. This strategy will crash and burn in a downturn, more so with the use of excessive leverage on futures option, no less.

Reply With Quote
The following user says Thank You to Arch for this post:
 
(login for full post details)
  #13 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received



SMCJB View Post
but you said...



Since you must have the cash required to buy the stock/instrument if you get assigned, shouldn't the return be calculated based upon that cash amount that you have tied up?

SMCJB,

Selling 1 naked put at about 1 STD 8 days out today will reduce the buying power by $1,030 according to Tastyworks:



Buying 1 contract at market now will reduce the buying power by $1,254:



I used the latter for the ROI calc. I'm not sure when I get assigned 1 contract, if the buying power will increase from $1,030 to $1,254. I assume that will happen.

Started this thread Reply With Quote
The following user says Thank You to PK007 for this post:
 
(login for full post details)
  #14 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received


Mativen View Post
Where did you trade MES for only $0.52? Thank you.

Mativen,

Tastyworks

Started this thread Reply With Quote
The following 2 users say Thank You to PK007 for this post:
 
(login for full post details)
  #15 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received

MES Trade Update:




Started this thread Reply With Quote
The following 2 users say Thank You to PK007 for this post:
 
(login for full post details)
  #16 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received


PK007 View Post
Mativen,



Tastyworks



Apologies Mativen. I see there is an additional $1.50 in commissions when opening a trade. I missed it since on the statement it's not shown separately per trade.
No commission on closing the trade.


Sent using the futures.io mobile app

Started this thread Reply With Quote
The following user says Thank You to PK007 for this post:
 
(login for full post details)
  #17 (permalink)
 Mativen 
Los Angeles, CA/USA
 
Experience: None
Platform: NT, TOS, TS
Broker: TD, TS, NT
Trading: Futures, SPY, QQQ
 
Posts: 8 since Aug 2020
Thanks: 8 given, 11 received

Thank you.
I have a question, where did you see 1 SD in TastyWorks?

Reply With Quote
The following 2 users say Thank You to Mativen for this post:
 
(login for full post details)
  #18 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received


Mativen View Post
Thank you.
I have a question, where did you see 1 SD in TastyWorks?

If you scroll up or down any of the options tables, you'll see dashed lines. The first will be 1 SD and the second, further away will be 2 SD.

See below a screenshot on the PC platform. On the mobile app, it says "1 SD" or "2 SD" at the line.


Started this thread Reply With Quote
The following 3 users say Thank You to PK007 for this post:
 
(login for full post details)
  #19 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received

So, a couple of things happened on Friday the 3rd.

I got assigned 1 MES contract since the price closed below the strike price of the short put with a strike of 4550.
A couple of hours before the close and when it seems very unlikely that price will recover above 4550, I sold the 7 DTE call at the 4650 strike. Why 4650 and not 1 SD out like the puts? The problem is the credit was very low at 1 SD. I therefore chose 4650 in order to get more credit in the range of $50-$60. Similar to the short put up until now. I'n not too concern about it at this stage since overall, the strategy will still be profiable if price rises and close above 4650.

This might become an issue if price continues to fall, but we'll see.

Below is the situation as it stands now. The option contract is showing an unrealized loss of $80 at the time of this post. Will only show the unrealized profit/loss on the futures contract and the realised profit/loss on the option. Just makes it easier.

Going forward, I'll post an update once a week when closing the short call.


Started this thread Reply With Quote
The following 5 users say Thank You to PK007 for this post:
 
(login for full post details)
  #20 (permalink)
 PK007 
South Africa
 
Experience: Intermediate
Platform: Tastyworks, Ninjatrader
Broker: Tastyworks, IB, Ninja
Trading: Stocks, Options and Futures
 
Posts: 64 since Mar 2013
Thanks: 35 given, 121 received


In hindsight, made a mistake yesterday. After I was assigned 1 contract at 4550 last week, MES rebound as you might be aware.

When it reached 4600, I decided to sell for a decent profit and also bought back the short call for a $20 loss. Net, the trade made $230. Of course it then went much higher and I missed out on an additional $250.

Anyway, will take note and over time see if this was in fact the correct decision.

I then continued with the strategy and sold a put 10 DTE.




Started this thread Reply With Quote
The following 3 users say Thank You to PK007 for this post:


futures io Trading Community Traders Hideout Options > The Wheel Strategy on Options


Last Updated on April 13, 2022


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
     



Copyright © 2022 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, Ph: +507 833-9432 (Panama and Intl), +1 888-312-3001 (USA and Canada), info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts