To The Moon

The option wheel strategy I use involves two key steps:

- First, I sell cash-secured puts, which generate income through premiums.

- If I'm assigned the shares, I then sell covered calls at or above the assigned price—earning more premium and possibly locking in capital gains.

There are plenty of resources online that explain how the wheel strategy works, so I won’t go into the basics here. Instead, I’ll focus on how I personally customize the approach to generate consistent income while managing risk.

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Risk Considerations

Like any strategy, this isn’t without risk—especially if the stock takes a sharp dive, leaving you with a large unrealized loss. To reduce that risk, here are the guidelines I follow when picking stocks:

1. Stick to profitable companies with a solid track record of positive earnings. I steer clear of speculative or meme stocks.

2. Only choose stocks you're comfortable owning. It’s a bonus if they pay dividends, but that’s not a strict requirement.

3. Diversify across sectors. Avoid putting all your option trades in one industry—this helps prevent getting overexposed if bad news hits a specific sector.

4. Use valuation tools. I often rely on the analysis section in the Tiger app to check if a stock is reasonably priced before committing.

5. Of course, the stocks need to have options. I usually look for those with weekly options as they tend to offer much better premiums and liquidity