Wealth Building With Options

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Wealth Building With Options episodes

October 27Ep90 - Discounted Cash Flow Models: Strengths and Weaknesses
In this episode, Dan explains how discounted cash flow models can help investors estimate what a stock may actually be worth. He breaks down the basic components of a DCF model, then uses real stocks to show both its usefulness and its limitations.
Dan also explains why a DCF valuation should never be treated as a prediction. Assumptions matter, small changes can produce very different results and DCF analysis works best as one part of a broader stock-selection process.
Key Topics
What a discounted cash flow model does
Estimating intrinsic stock value
Discounting future cash flows
Free cash flow and terminal value
Weighted average cost of capital
Base, bull and bear valuations
Why DCF assumptions matter
Valuing growth versus value stocks
Real examples using ADBE, SMCI and MO
Using DCF analysis for Wheel candidates
Key Takeaways
DCF models estimate value, not future stock prices. They use expected future cash flows and the cost of capital to estimate what a company may be worth today.
The assumptions can make or break the analysis. Growth rates, discount rates and terminal-value assumptions can significantly change the result.
Scenario analysis provides more context. Looking at base, bull and bear cases can help investors see how different assumptions affect valuation.
DCF models aren't equally useful for every company. Fast-growing stocks can be particularly difficult to value because so much depends on future expectations.
Use DCF as one data point. Dan combines it with other fundamental analysis when selecting stocks for long-term investing and Wheel trades.
Connect
Paid subscribers to Wealth Building With Options can watch the Video Extra for this episode to see Dan walk through the DCF model visually. Visit wealthbuildingpodcast.com to become a paid subscriber.
You can also try the Wealth Builder platform, which includes Dan's discounted cash flow model along with tools for tracking Wheel trades, aggregate option premium and dividends.
Visit MarketTaker.com/tryWB for a free 30-day trial of the Wealth Builder platform.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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29 min
October 20Ep89 - Using Skew to Make Better Wheel Trades
In this episode, Dan explains how volatility skew can help traders make more informed decisions when selecting strikes for covered calls and cash-secured puts. He starts with the volatility risk premium behind option selling, then breaks down how implied volatility can vary across different strikes on the same stock. That difference, known as vertical skew, can reveal where option buyers and sellers are creating unusual pricing opportunities.
Dan explains the typical volatility pattern, why lower-strike options often carry higher implied volatility and what it means when that relationship changes. Using a real-world example, he shows how strong demand for calls can create an upward-sloping call skew, giving Wheel traders richer premiums at higher strikes but also signaling greater upside risk. He then shows how the same analysis can improve cash-secured put selection and even help evaluate covered strangles.
Key Topics
Why the volatility risk premium matters to Wheel traders
What volatility skew is and why it develops
The difference between horizontal and vertical volatility skew
Why lower-strike puts typically have higher implied volatility
How covered call selling can influence volatility at higher strikes
What an upward-sloping call skew can reveal about market demand
Using Newmont Mining as an example of abnormal call skew
Balancing richer covered call premiums against greater upside risk
How skew can improve cash-secured put and covered strangle decisions
Using implied volatility across strikes to improve Wheel strike selection
Key Takeaways
Skew shows that implied volatility isn't the same at every strike. Options on the same underlying can trade at different implied volatilities depending on their strike price, creating a slope across the option chain.
Normal skew is largely driven by supply and demand. Investors frequently buy lower-strike puts for protection, which can increase their prices and implied volatility. At the same time, covered call sellers create natural supply in higher-strike calls.
Some stocks develop an unusual call skew. When traders aggressively buy calls in fast-moving, popular or momentum-driven stocks, successively higher call strikes can actually carry higher implied volatility instead of lower volatility.
Higher implied volatility can mean richer premium, but it isn't automatically an edge. The reason calls are expensive may be that the market sees legitimate potential for a large upside move. Traders need to evaluate why the skew exists before assuming the additional premium is attractive.
Newmont Mining provides an example of upward-sloping call skew. Dan shows how implied volatility increased as the call strikes moved higher, reflecting a stock that had demonstrated the ability to make substantial upside moves.
A richer covered call comes with a trade-off. Selling a higher-strike call at elevated implied volatility can produce more premium, but the stock may also be more likely to make the kind of move that forces an adjustment or causes the trader to give up upside.
Tracking aggregate premium helps put adjustments in context. Dan explains that knowing how much option premium you've collected over the life of a Wheel position can help determine whether accepting the possibility of a negative scalp or adjustment makes sense.
There is no universal rule for unusual skew. An upward-sloping call skew doesn't mean traders should always sell covered calls or always avoid them. The decision depends on the stock, the potential upside move, adjustment possibilities and the additional premium available.
Skew can also benefit cash-secured puts. When lower put strikes carry increasingly higher implied volatility, traders may be able to sell out-of-the-money puts at richer volatility levels. In some cases, both sides of the skew can also make a covered strangle worth evaluating.
Make skew part of your normal option-chain analysis. When evaluating a Wheel trade, don't look only at the implied volatility of the strike you're considering. Scan the strikes above and below it to see whether another strike offers a better combination of premium, room for the stock to move and annualized return.
Connect
Try the Wealth Builder trading platform, designed specifically for Wheel traders. It tracks aggregate premium over time and provides tools to help evaluate underlying stocks and optimize potential Wheel candidates.
Users who upgrade to Wealth Builder Pro also get access to a professional-level discounted cash flow model for valuing stocks.
Visit MarketTaker.com/WB to start a free 7-day trial of the Wealth Builder platform.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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35 min
October 13Ep88 - How to Talk to Your Spouse About Trading
Dan tackles a part of trading that rarely gets discussed: how to talk with your spouse or partner about putting family money into a trading account. Drawing on his own experience and more than three decades of working with traders, Dan explains why concerns about risk, losses and financial responsibility are reasonable, especially when your partner doesn't yet have the context behind your trading plan.
Dan walks through the conversations traders should have before committing money, time or resources to trading. He covers building a clear trading plan, setting risk limits, preparing for drawdowns, getting proper education, discussing the time commitment and anticipating additional expenses. Most importantly, he explains why the goal shouldn't simply be getting permission to trade. It should be creating genuine buy-in by listening to your partner's concerns and making financial decisions together.
Key Topics
Why trading can create financial and emotional concerns for a spouse
Deciding whether you're truly prepared to become a self-directed trader
Creating a trading plan before committing family money
Determining position size, targets and loss limits in advance
Preparing emotionally for losing trades and drawdown periods
Giving your spouse context about how you plan to manage risk
Why trading education should be part of the conversation
Discussing the time commitment trading will require
Planning for equipment, tools and other trading-related expenses
Asking questions and building genuine agreement with your spouse
Key Takeaways
Your spouse's concerns about trading may be completely reasonable. Trading represents a new use of family money, and without context, a partner may naturally worry about how much could be lost and whether the trader truly understands the risks.
Answer the hard questions for yourself first. Before explaining your trading to someone else, know whether you should be trading, how much capital you're willing to commit and what risks you're prepared to take.
Trading requires a defined plan. You should know what triggers a trade, how much of the account you'll allocate, how targets will be determined and when losses will be cut.
Losses are part of trading. Even a sound approach can experience individual losing trades and periods of drawdown. A trader needs to understand and accept that before putting family capital at risk.
Know your emotional limits too. Dan emphasizes having an “emotional stop loss” and recognizing when losses could push you into making impulsive decisions or trading on tilt.
Give your spouse facts rather than vague assurances. A well-developed trading plan provides specific information about what you're doing, why you're doing it and how you intend to control risk.
Education should be part of the plan. Dan argues that traders should develop the knowledge and skills required before putting significant capital at risk rather than learning everything through expensive mistakes in the market.
Trading affects more than the brokerage account. The time spent researching, monitoring positions and learning can affect family responsibilities, so expectations about the time commitment should be discussed in advance.
Talk about expenses before they appear. Education, software, tools, monitors and other trading expenses should be part of the plan rather than unexpected charges that create friction later.
Don't aim for permission. Aim for buy-in. Ask your spouse questions, encourage concerns and listen to the pushback. Those conversations can reveal weaknesses in the plan and help both partners make the decision together.
Connect
Try the Wealth Builder platform, designed specifically for Wheel traders. It tracks aggregate option premium over time, helps determine cost basis and includes tools for evaluating underlying stocks and identifying potential Wheel candidates.
Podcast listeners can get a free 7-day trial with no credit card required at MarketTaker.com/WB.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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28 min
October 06Ep87 - What's the Best Market for Trading the Wheel? (You'll Be Surprised!)
Dan challenges the idea that calm, sideways markets are always best for trading the Wheel. His argument is more counterintuitive: Volatile markets can create some of the best opportunities for covered calls and cash-secured puts, provided traders have clear objectives, understand how to adjust positions and are comfortable with the stocks they may end up owning.
Dan explains why falling markets can create attractive buying opportunities through cash-secured puts, while sharp rallies can create opportunities to sell covered calls at higher strikes. He also digs into adjustment techniques such as net zero rolls and shows how “wish list orders” can take advantage of large market swings that might otherwise make traders nervous. The key is learning to view volatility as an opportunity rather than automatically treating it as a problem.
Key Topics
Why volatile markets can be attractive for Wheel traders
The biggest reasons traders believe covered calls and cash-secured puts don't work
Using cash-secured puts to buy stocks at predetermined prices
Evaluating stocks based on value rather than short-term price movements
Managing covered calls when stocks move sharply above the strike
Using net zero rolls to adjust covered call positions
Trading money for time when rolling options
Why adjustment skills matter in fast-moving markets
Using wish list orders for covered calls and cash-secured puts
Turning large market swings into potential Wheel opportunities
Key Takeaways
Volatility isn't necessarily the enemy of the Wheel. Dan believes volatile markets can actually be some of the best environments for covered calls and cash-secured puts when traders have clear objectives and know how to manage positions.
A falling stock doesn't automatically mean a cash-secured put failed. If you've already determined that you're willing to own the stock at the strike price, a decline can simply lead to acquiring shares at a price you previously decided was acceptable.
Make the buying decision before the market gets emotional. Selling a cash-secured put forces you to choose the price where you're willing to own the stock in advance, based on valuation, annualized yield or another defined objective.
Long-term value matters more than short-term price fluctuations. Dan emphasizes evaluating what a company is worth rather than trying to predict exactly where its stock will trade tomorrow, next week or next month.
Covered calls require a plan for strong upside moves. When a stock rises sharply through the call strike, the answer isn't necessarily to panic or immediately allow assignment. Adjustment techniques can give the position more time and potentially move the strike higher.
A net zero roll trades money for time. By buying back an in-the-money call and selling a later-dated call at a higher strike for approximately the same amount, the trader can change both the strike and expiration without necessarily adding a new debit to the position.
Adjustment skills are part of trading the Wheel. Stocks will sometimes move much farther than expected. Knowing how to roll and manage those situations can make large moves less intimidating.
Volatile markets can create better opportunities for cash-secured puts. Sharp selloffs can push option premiums higher and allow orders at lower strikes to fill, potentially giving investors an opportunity to acquire shares at prices they already identified as attractive.
Wish list orders can take advantage of sudden market moves. Dan places orders at strikes that may initially look unrealistic, knowing that a sharp market move could temporarily push option prices high enough for those orders to fill.
The goal isn't to avoid every uncomfortable market move. The Wheel is a long-term process. Dan's approach is to use volatility, disciplined strike selection and adjustment techniques to keep working the strategy rather than assuming that a stock crossing a strike means the trade failed.
Connect
Try the Wealth Builder platform, designed specifically for Wheel traders. It tracks aggregate option premium over time, helps determine cost basis and includes tools for evaluating underlying stocks and identifying potential Wheel candidates.
Podcast listeners can get a free 7-day trial with no credit card required at MarketTaker.com/WB.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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29 min
September 29Ep86 - Tracking Option Wheel Trade Results
In this episode, Dan tackles one of the most overlooked parts of trading the Wheel: accurately tracking results over time. A single cash-secured put or covered call doesn't tell the whole story. To understand how a Wheel position is actually performing, you need to account for every option credit and debit, assignment, stock transaction and completed cycle associated with the underlying.
Dan explains why brokerage platforms aren't designed to track a long-running “big cycle” of Wheel trades and why reconstructing performance after the fact can become a tedious spreadsheet exercise. He walks through the challenges of calculating results when trades include assignments, covered calls, cash-secured puts, stock scalps and open positions. He also introduces the Wealth Builder platform, which he created to make Wheel tracking, fundamental analysis and risk management easier.
Key Topics
Why accurately tracking Wheel trade results matters
Measuring the entire “big cycle” instead of individual trades
Why traditional cost basis calculations don't tell the whole story
Tracking option credits, debits and stock transactions
Why brokerage platforms aren't designed to track Wheel strategies over time
Reconstructing historical Wheel trades with brokerage data and spreadsheets
Accounting for assignments, stock scalps and expired options
Avoiding incomplete cycles and orphaned credits or debits
Tracking aggregate premium and the cumulative discount effect
Using the Wealth Builder platform for trade tracking, fundamentals and risk management
Key Takeaways
Measure the entire Wheel process. Looking only at the latest cash-secured put or covered call can give an incomplete picture. Previous trades on the same underlying affect the results of the larger Wheel cycle.
Treat trading like a business. Dan emphasizes that Wheel trading involves a continuing series of debits and credits. Just as a business tracks its costs and receipts, traders should know the actual numbers behind their positions.
Start tracking early. Reconstructing months or years of Wheel trades after the fact can require digging through brokerage history and rebuilding the position transaction by transaction.
Your brokerage account doesn't necessarily tell you how your Wheel strategy performed. Brokerage platforms track transactions and positions, but they're generally not designed to combine multiple option and stock transactions into one continuous Wheel cycle.
A complete cycle needs matching transactions. When analyzing historical trades, make sure the period you're measuring contains complete transactions rather than stock purchases, option sales or other positions that remain open at the end of the measurement period.
Watch for orphaned credits and debits. An open short option can leave a credit without a corresponding closing debit, which can distort the results if it's included as though the trade were complete.
Stock assignments and scalps require special attention. When shares are acquired through put assignment and later called away, both sides of the stock transaction need to be accounted for when calculating the results of the complete cycle.
The cumulative discount effect provides a broader view of a Wheel position. Tracking aggregate option premium alongside stock transactions can help show how the complete series of Wheel trades has affected the position over time.
Risk management should be planned before emotions take over. Dan's Wealth Builder platform includes a Risk Manager that allows traders to establish risk thresholds in advance rather than making decisions in the heat of the moment.
Better tracking creates better information for future decisions. Knowing the results of previous Wheel cycles gives traders an objective baseline they can use to evaluate and refine their process.
Connect
Try the Wealth Builder platform, created specifically for Wheel traders. It tracks Wheel trades across a portfolio, including aggregate premium, cumulative discount effect, stock scalps and dividends. It also includes fundamental data, position alerts, risk-management tools and an educational video library.
Podcast listeners can get a free 7-day trial with no credit card required at MarketTaker.com/WB.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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25 min
September 22Ep85 - Double Dipping When Trading the Options Wheel
Dan explains how certain Wheel trades can create an opportunity to “double dip” by collecting option premium from both sides of a stock position. The strategy is a covered strangle, combining stock ownership with a short call and a short put. Dan uses a real position in The Metals Co. (TMC) to show how this setup can develop naturally while trading the Wheel.
Dan walks through why he chose to sell puts instead of covered calls while TMC was trading near $4, what happened when one tranche of those puts was assigned and how the additional shares opened the door to selling calls while another put position remained open. He also explains why he accepted assignment instead of rolling the puts, demonstrating how liquidity, bid-ask spreads, synthetic positions and trade objectives can influence real-world Wheel management decisions.
Key Topics
What “double dipping” means when trading the Options Wheel
Understanding the structure of a covered strangle
Using a real TMC Wheel trade as a case study
Selling puts when you don't want to cap a stock's potential upside
Managing multiple tranches of shares within the same Wheel position
Combining long stock, short puts and short calls
Using different strikes and expirations in a split-time strangle
Why assignment can sometimes be preferable to rolling a cash-secured put
How option liquidity and bid-ask spreads affect trade management
When liquidity can become less important in a Wheel strategy
Key Takeaways
Covered strangles can create two sources of option premium. When the setup is appropriate, an investor who owns shares can sell calls against part of the position while simultaneously selling puts on shares they're willing to acquire.
The strategy isn't appropriate for every Wheel trade. Dan views the covered strangle as a tool to use when the position, outlook and trade objectives create the right opportunity rather than something that should automatically be applied to every stock.
You don't have to sell calls against every share you own. Dan wanted to maintain the upside potential on his original TMC shares, so he planned to sell covered calls only against the newer shares acquired through put assignment.
Selling puts can make sense when you're willing to own more shares. Dan was comfortable acquiring additional TMC shares at the $4 strike, allowing him to collect put premium while waiting to see whether assignment occurred.
Assignment can create the next stage of the Wheel. Once Dan's first tranche of puts was assigned, those new shares could be used for covered calls while his other short puts remained open.
A covered strangle doesn't necessarily require matching expirations. Calls and puts can potentially use different expiration dates, creating what Dan describes as a “split time strangle.”
Rolling isn't automatically the best choice. Even though a covered call and cash-secured put can be synthetically equivalent, poor liquidity may make rolling the put unattractive.
Execution costs matter. Wide bid-ask spreads can make it difficult to close and roll an option at an acceptable price, potentially changing the best way to manage the position.
The Wheel can provide another way to deal with less-liquid options. If you're comfortable accepting assignment, allowing an option to reach expiration can sometimes eliminate the need to pay an unfavorable spread to close it.
Trade management should follow the objective of the position. Dan's TMC example shows how stock outlook, volatility, liquidity, assignment and existing share exposure can all influence whether to sell calls, sell puts, roll or simply allow an option to expire.
Connect
Join Dan for the Wealth Builder Trade Room, a live online master class where he trades his personal IRA and walks through his positions, option selection, adjustments, rolls and the fundamental and technical analysis behind his investments. The Trade Room meets every Friday at 11:15 AM Eastern / 10:15 AM Central / 8:15 AM Pacific.
To join the Wealth Builder Trade Room, visit MarketTaker.com/wealth.
Subscribe to Wealth Building With Options in your favorite podcast app and leave a comment to let Dan know what you'd like to hear covered in future episodes.
To learn more about Dan Passarelli and Market Taker Mentoring, visit 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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21 min
September 15Ep84 - Index Options and The Wheel with Kevin Davitt of Nasdaq
Dan sits down with Kevin Davitt, head of Nasdaq's Index Options Content, to explore the evolution of options markets and how index options can fit into strategies familiar to individual investors. Kevin brings experience as an options market maker and former senior instructor at the CBOE Options Institute, giving him a unique perspective on how options markets, technology and education have changed over the years.
Dan and Kevin dig into whether the Wheel can be adapted to cash-settled index options such as NDX and XND. They discuss the important differences between index options and traditional equity options, including cash settlement, assignment risk, notional exposure and margin. Kevin also explains how index options can be used to manage portfolio risk, generate premium and create alternative versions of familiar strategies without necessarily selling calls against every individual stock in a portfolio.
Key Topics
How options markets have evolved from open outcry to electronic and systematic trading
The role competition among options exchanges plays in improving markets for investors
Why product innovation matters in the options industry
Using familiar option strategies with index products
How the Wheel differs when using cash-settled index options
Understanding the size and notional exposure of NDX options
Using smaller XND options for more accessible index exposure
How cash settlement eliminates early assignment risk
Using index options to manage risk across a portfolio of individual stocks
Why defined-risk spreads are commonly used when trading index options
Key Takeaways
The Wheel doesn't translate directly to index options. Traditional Wheel trades rely on stock assignment, but an index is a reference value rather than a security that can be owned. That means the strategy has to be adapted when using cash-settled index products.
NDX carries significant notional exposure. With a 100 multiplier, an NDX level of 30,000 represents approximately $3 million in notional exposure. That's one reason many traders use defined-risk put spreads instead of selling puts outright.
Smaller index products can make these strategies more accessible. XND is designed at approximately 1/100 the value of NDX, allowing investors with smaller accounts to access Nasdaq-100 index options with substantially less notional exposure.
Cash settlement changes the assignment equation. Index options don't result in shares being delivered and they cannot be exercised or assigned before expiration, eliminating the early assignment risk associated with equity options.
Index options can provide another way to generate premium against a portfolio. Instead of selling covered calls on multiple individual technology stocks, an investor could potentially sell an index call against a portfolio that broadly behaves like the Nasdaq-100 while maintaining ownership of the individual stocks.
Index options can help spread risk across multiple companies. Rather than concentrating an options position in a single stock, an index provides exposure to a diversified group of securities.
Dispersion creates additional strategy possibilities. Kevin explains how investors can own optionality in individual stocks while selling option premium at the index level, potentially offsetting some of the time decay associated with the individual options.
Margin still matters. Selling outright index options can require significant capital, particularly with a product as large as NDX. The exact margin ultimately depends on the brokerage firm and account.
Defined-risk spreads dominate NDX trading. Kevin notes that more than 85% of the NDX trading Nasdaq sees is spread-based, reflecting the practicality of capping risk when dealing with a large-notional index.
Understanding the product comes before choosing the strategy. Index options can offer flexibility, but investors need to understand settlement, expiration, exposure, margin and other structural differences before adapting familiar strategies like the Wheel to these products.
Connect
If you enjoyed this episode, subscribe to Wealth Building With Options on your favorite podcast platform and leave a review to help more investors discover the show.
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 follow more of Kevin Davitt's work, visit Nasdaq's Index Options page, where Kevin publishes a twice-monthly piece covering markets, index options and related strategies. You can also connect with Kevin on LinkedIn.
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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52 min
September 08Ep83 - Macro Forces Affecting Your Investments: An Interview with Robert Savage of Savage Markets
Dan sits down with Robert Savage of Savage Markets to explore the macro forces shaping today's investment landscape. With more than 40 years of experience in global markets, Robert brings a unique perspective from his career in foreign exchange, commodities, options, research and market strategy. He explains how options data can provide forward-looking information and why investors should pay attention to forces well beyond the individual stocks in their portfolios.
Dan and Robert discuss prediction markets, currency moves, the Japanese yen, interest rates, inflation, supply shocks and the possibility of stagflation. They also examine how these forces can filter down to individual stocks and Wheel trades. Robert explains why he expects greater dispersion between market winners and losers, why volatility could remain important and why materials and related industries stand out in a world increasingly focused on supply constraints.
Key Topics
Insights from Robert Savage's four decades of experience in global macro markets
Using options data as a forward-looking indicator of market expectations
How liquidity affects the usefulness of options market signals
The growing role of prediction markets in investment research
Using prediction markets to evaluate economic, political and earnings-related events
How moves in the Japanese yen can affect U.S. equities and options
The potential unwinding of global carry trades
How supply shocks are changing the inflation and interest-rate environment
Why stagflation could create greater volatility and stock market dispersion
Opportunities Robert sees in materials, mining and related industries
Key Takeaways
Macro forces can affect even a stock-focused investor. Currency movements, global capital flows, interest rates and supply-chain disruptions can ultimately influence individual equities and options positions.
Options provide valuable forward-looking information. Robert uses option markets to evaluate factors such as bullish or bearish skew, expected volatility and where the market may be anticipating future trouble.
Prediction markets are becoming another source of market intelligence. Event contracts can provide insight into expectations surrounding earnings, economic data, regulation and political developments that could eventually affect individual investments.
Currency markets can have a ripple effect across portfolios. Moves in the yen and dollar can affect Treasury markets, international investment flows, interest rates and ultimately the relative attractiveness of U.S. stocks.
The carry trade remains part of the global market picture. Changes in interest rates across Japan, Korea and other markets can alter the economics of global investment strategies and influence capital flows.
The economic environment has shifted from a demand problem to a supply problem. Robert argues that shortages and disruptions involving oil, copper, rare earth metals and other resources have created a fundamentally different inflationary environment.
Higher volatility may require Wheel traders to adjust their expectations. Stocks that historically moved only a few percentage points could experience larger swings as supply chains, capital flows and economic conditions become less predictable.
Nominal GDP is one macro indicator Robert watches closely. Strong nominal growth can support corporate profitability even in an inflationary environment, but the benefits won't necessarily be distributed evenly across companies.
Stock selection could become increasingly important. Greater dispersion means some companies and industries may thrive while others struggle, making individual company and sector analysis more valuable.
Materials stand out as an area to watch. Robert believes years of underinvestment combined with growing demand for critical resources could create opportunities in materials, mining and the companies supplying equipment to those industries.
Connect
If you enjoyed this episode, subscribe to Wealth Building With Options on your favorite podcast platform and leave a review to help more investors discover the show.
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 follow more of Robert Savage's macro market analysis, look for Savage Markets on Substack, where he publishes weekly content and interviews with guests.
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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36 min
September 01Ep82 - AI Prompts for Finding Stock Investments
AI can be a powerful research assistant for investors, but only if you know how to ask the right questions. In this episode, Dan shares the AI prompts he uses to research potential stock investments, analyze companies and dig deeper into fundamentals. From simple questions about what a company actually does to more advanced analysis of financial ratios, earnings trends and discounted cash flow, Dan demonstrates how AI can help investors conduct more thorough research.
Dan also explains one of the biggest dangers of relying on AI for investment research: inaccurate or outdated information. He shares how trial and error led him to refine his prompts to demand current financial data, calculations based on company financial statements and verification of the numbers. The goal isn't to let AI make investment decisions for you. It's to use it as a tool for gathering information, asking better questions and becoming a more informed investor.
Key Topics
Using AI as a research tool for finding stock investments
Simple prompts for understanding what a company actually does
Evaluating whether a company has a competitive moat
Analyzing stocks through the perspectives of Warren Buffett and Benjamin Graham
Researching P/E, price-to-book, price-to-cash-flow and other financial ratios
Comparing GAAP and non-GAAP earnings
Evaluating five-year earnings growth and identifying potential red flags
Analyzing changes in management guidance and earnings-call sentiment
Using AI to perform discounted cash flow analysis
Improving AI accuracy by requiring current data, verification and calculations
Key Takeaways
Start simple. Asking AI what a company actually does can reveal details about its business model, customers and revenue sources that aren't always obvious from its industry classification or stock symbol.
Use AI to explore different investment perspectives. Asking whether a company has a moat or how investors such as Warren Buffett or Benjamin Graham might evaluate it can uncover factors you may not have considered.
Don't blindly trust the numbers AI provides. Dan has encountered outdated financial data during his own research, making precision and verification critical when AI is being used for investment analysis.
Ask AI to calculate financial ratios rather than simply retrieve them. Using the latest company financial statements and requiring the calculations to be shown makes it easier to understand where the numbers came from and identify potential errors.
Compare GAAP and non-GAAP earnings. A significant difference between the two can reveal something about a company's financial performance that deserves further investigation.
Look beyond a single quarter. Dan examines earnings growth over five years and treats multiple quarter-over-quarter declines as a reason to investigate more closely rather than an automatic deal breaker.
Management guidance matters. Comparing the tone and outlook of the latest earnings call with the previous quarter can provide insight into how management sees the company's future.
Discounted cash flow analysis can add another layer to valuation. AI can help calculate a potential share value based on future cash flows, growth assumptions and the company's cost of capital.
Tell AI to show its work. Seeing the calculations makes it easier to spot errors while also helping you understand how valuation methods and financial metrics work.
Use AI as a tool, not a substitute for due diligence. Dan's approach is essentially “trust but verify”: use AI to accelerate research and deepen your understanding while continuing to scrutinize the information it provides.
Connect
If you enjoyed this episode, subscribe to Wealth Building With Options on your favorite podcast platform and leave a review to help more investors discover the show.
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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29 min
August 25Ep81 - Master Class on the Wheel
As he does during his live weekly Wealth Builder Trade Room, Dan takes listeners inside his own IRA to demonstrate how he manages Wheel trades in real time. He walks through several positions and explains the thought process behind deciding whether to sell puts, write calls, roll an existing position, wait for a better opportunity or simply let the trade develop.
Using examples from his actual portfolio, Dan shows how the Wheel is less about finding one perfect trade and more about methodically managing a series of decisions. He covers assignment, net zero rolls, earnings volatility, technical analysis, option premium and the importance of knowing when the math no longer justifies a trade.
Key Topics
How Dan methodically reviews and manages Wheel positions in his IRA
What happens after assignment on a cash-secured put
Using net zero rolls to move strikes and manage positions
Managing deep in-the-money covered calls when a stock rallies
Why time value matters when selecting options to sell
Taking advantage of higher implied volatility around earnings
Using support, moving averages, RSI and PAS Bands to guide decisions
Why sideways stocks can be particularly attractive for the Wheel
Using option premium to offset negative stock scalps
How wishlist orders can create opportunities without forcing a trade
Key Takeaways
Treat the Wheel as a process, not a collection of isolated trades. Dan's approach is to work through positions methodically, starting with the broader market and then focusing on stocks that require attention, particularly as expiration approaches.
Assignment is simply another step in the Wheel. After being assigned shares from a cash-secured put, the next decision may be to sell a covered call, but timing and pricing still matter.
Rolling can give a position more room to work. Dan demonstrates how net zero rolls can be used to change strikes while continuing to manage the overall position.
Don't sell an option just for the sake of selling one. When managing an in-the-money covered call, Dan looks for enough remaining time value to justify the new option. If the economics aren't there, the trade doesn't make sense.
Higher implied volatility can create attractive premium opportunities. Dan's earnings-related put trade illustrates how elevated IV can produce substantially richer premium, but that additional potential return comes with additional risk.
Sideways stocks can provide an ideal environment for the Wheel. Repeatedly selling puts and calls can work particularly well when a stock remains within a range and time decay is allowed to do its job.
Not every Wheel trade will unfold perfectly. A stock can run through a call strike or create the possibility of a negative scalp, but accumulated option premium can help offset those less-than-ideal outcomes.
Sometimes waiting is the trade. When a stock becomes overextended or the setup isn't favorable, Dan is willing to give the position time rather than immediately adjusting it.
Wishlist orders can help investors stay disciplined. Instead of chasing premium, Dan places orders at strike prices and premiums he'd be happy to receive and lets the stock come to him.
Connect
Want to see Dan put these concepts into practice? Join the Wealth Builder Trade Room, where Dan trades his personal IRA live, walks through his option selection and adjustments step by step and discusses the stocks and long-term investments he's analyzing.
The class meets every Friday at 11:15 a.m. Eastern / 10:15 a.m. Central.
Visit MarketTaker.com/wealth to learn more and join the Wealth Builder Trade Room.
If you enjoyed this episode, subscribe to Wealth Building With Options on your favorite podcast platform and leave a review to help more investors discover the show.
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.
Trumpet
Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0
Wah Wah Wah
Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0
Dramatic Drum Roll
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29 min

About Wealth Building With Options

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Welcome to the Wealth Building With Options Podcast with Dan Passarelli. This podcast is dedicated to making you a calm, consistent and confident options trader. Inside each episode, Passarelli, an…