Mastering the Wheel Strategy A Conservative Income Approach in Options Trading

1. Mastering the Wheel Strategy: A Mastering the Wheel Strategy: A Conservative Income Approach in Conservative Income Approach in Options Trading Options Trading In the world of options trading, strategies range from the aggressive and speculative to the conservative and calculated. If your goal is to grow your portfolio with consistent returns and controlled risk, the Wheel Strategy deserves a permanent place in your trading toolbox. What is the Wheel Strategy? The Wheel Strategy is a systematic options strategy built on selling cash- secured puts and covered calls. The objective is simple: generate income through option premiums while potentially acquiring and offloading quality stocks at favorable prices. Think of it as a “rinse-and-repeat” approach: 1.Sell a cash-secured put on a stock you'd like to own. 2.If assigned, sell a covered call against the stock. 3.If the call gets exercised and the shares are sold, repeat step 1. It's called the “Wheel” because you're continually cycling through this process—earning income at every turn. Step-by-Step Breakdown Step 1: Sell a Cash-Secured Put Identify a stock you’re comfortable owning and sell a put option at a strike price you wouldn’t mind buying the stock at. Ensure your account has enough capital to purchase 100 shares if assigned. •Outcome A: The stock stays above the strike price—option expires worthless, and you pocket the premium. •Outcome B: The stock falls below the strike price—you’re assigned the shares at the strike, and the premium reduces your cost basis. Either way, you win. Step 2: Sell a Covered Call

2. Now that you own 100 shares, sell a covered call at a strike price above your purchase price. •If the stock is called away, you sell the shares at a profit plus the call premium. •If the stock remains below the call strike, you keep the shares and the premium—then sell another call. Why This Strategy Works for Risk-Conscious Traders The Wheel Strategy naturally complements our education and trading philosophy: 1. It Enforces Discipline Traders often get swept up in the excitement of speculative trades. The Wheel is grounded in rules, planning, and patience—skills we focus on teaching every day. 2. Built-in Risk Management Since puts are cash-secured and calls are covered, you're not taking on undefined risk. You're simply getting paid to potentially buy and sell stocks you already want to trade. 3. It Leverages Implied Volatility The Wheel thrives in high-IV environments. When IV rises, so do the option premiums. Our volatility scanning tools help identify ideal candidates for this strategy—stocks where you can earn premium income while staying within your risk parameters. Stock Selection Tips for the Wheel While the mechanics of the Wheel are simple, stock selection is where many traders go wrong. Here’s what to consider: •Liquidity: Ensure the options have tight bid-ask spreads. •Fundamentals: Choose stocks you’re comfortable holding for the long term. •Volatility: Favor stocks with moderately high implied volatility for better premium capture—but avoid those with extreme swings.

3. Avoiding the Common Pitfalls Even a conservative strategy can lead to poor outcomes if not executed correctly. Here are a few traps to steer clear of: 1.Overleveraging: Only sell puts you can afford to be assigned. 2.Chasing Premiums: High premiums are tempting, but they often come with high risk. Focus on quality stocks. 3.Neglecting Trade Management: Rolling options, adjusting strike prices, or closing early are part of an active management approach we teach in- depth.