Wealth Building With Options

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Wealth Building With Options episodes

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.
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29 min
August 18Ep80 - Two Guys Talking About the Wheel
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
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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31 min
August 11Ep79 - How I Find Wheel Trade Candidates
Finding a great Wheel trade starts long before choosing a strike price or expiration. In this episode, Dan walks through his step-by-step process for finding candidates for covered calls and cash-secured puts. The process begins with a fundamental distinction: Are you evaluating a stock or ETF you already own or searching for a completely new opportunity? From there, whether you want to skate and collect premium or trade into or out of the stock determines which tools matter most.
Dan explains how he combines fundamental analysis with technical tools including support and resistance, RSI and his PAS Bands indicator. He also discusses where new investment ideas come from and why every idea still requires your own due diligence. The goal isn't simply to find stocks with attractive option premiums; it's to build a repeatable process for identifying candidates that fit your objective, valuation criteria and overall Wheel strategy.
Key Topics
Starting the candidate-selection process with stocks and ETFs you already own
Defining your skate vs. trade objective before choosing an option
Using horizontal resistance to select covered call strikes
Applying RSI to identify overbought and oversold opportunities
Using PAS Bands to help establish covered call and cash-secured put strikes
Evaluating long-term investments with fundamental analysis
Using P/E ratios, discounted cash flow and other valuation methods
Finding new Wheel candidates through research, scanners, AI, etc.
Using support levels when evaluating cash-secured put opportunities
Combining fundamentals and technical analysis based on the objective of the trade
Key Takeaways
Start with the objective. If you already own the stock, determine whether you're trying to collect premium and avoid assignment or intentionally trade out of the position.
Match the analysis to the trade. Long-term value opportunities generally call for fundamental analysis, while shorter-term skate opportunities rely more heavily on technical analysis.
Resistance matters for covered calls. Dan looks to position skate-objective covered call strikes at or above meaningful horizontal resistance.
Support matters for cash-secured puts. Strong support can help identify strike levels where historical buying pressure may improve the probability of skating.
RSI can improve timing. Dan watches for moves back below 70 after an overbought reading for covered calls and back above 30 after an oversold reading for cash-secured puts.
Valuation should guide entry and exit. If a valuation metric helped justify buying a stock when it was undervalued, that same framework can help identify when it has become sufficiently overvalued to sell.
Dividend holdings require different thinking. A dividend yield is effectively locked in based on your purchase price. A rising stock price doesn't automatically make an existing dividend investment less attractive.
Ideas are only the beginning. Friends, news, paid research, scanners and AI can generate candidates, but Dan emphasizes doing independent research before acting.
Premium alone doesn't make a good trade. For a fundamentally driven cash-secured put, both the prospective purchase price and the return earned if the put skates should make sense.
Build a repeatable process. The overarching theme is to use fundamentals for value-oriented investments and technical tools for skate opportunities rather than choosing candidates or strikes arbitrarily.
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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33 min
August 04Ep78 - The Metrics I Use on Wheel Trades and How They Work - Part 2
In Part 2 of this series, Dan expands on the metrics every Wheel trader should understand by focusing on break-even calculations, cumulative discount effect, stock price basis and the often-overlooked role of interest rates. These metrics provide a more complete picture of long-term performance by tracking the combined impact of option premium, assignments, stock price movement and capital efficiency rather than evaluating each trade in isolation.
Dan also explains why different calculations require different stock price references, how cash and interest rates influence option pricing and trade selection, and why investors should evaluate Wheel trades as part of an ongoing business instead of a collection of unrelated positions. Together, these concepts help traders make more informed decisions while developing a consistent framework for measuring long-term success.
Key Topics
Understanding breakeven vs. tax cost basis
Calculating the cumulative discount effect
Tracking Wheel performance across multiple trade cycles
Why different metrics use different stock price references
Choosing the correct stock price basis for each calculation
How interest rates affect option pricing
The relationship between cash-secured puts and idle cash
Interest income as part of total Wheel returns
Using interest rates as an investment benchmark
Measuring Wheel trades as a long-term business
Key Takeaways
Breakeven calculations help measure how option premium reduces investment risk but should not be confused with tax cost basis.
The cumulative discount effect tracks the long-term impact of every premium collected, debit paid and stock assignment across an entire Wheel cycle.
Evaluating Wheel trades individually provides an incomplete picture; long-term results are best measured across multiple trades.
Different metrics require different stock price references depending on what the calculation is designed to measure.
Cash-secured puts should be evaluated using the strike price because it represents the capital committed to the trade.
Interest rates influence option pricing, put-call parity, early exercise decisions and overall trade evaluation.
Cash reserved for cash-secured puts continues earning interest, making it an important contributor to total returns.
Interest rates also serve as a benchmark for comparing Wheel trades against lower-risk investment alternatives.
Consistently tracking meaningful metrics helps investors improve decision-making and better understand their long-term performance.
Successful Wheel traders think beyond individual trades and focus on building a repeatable, measurable investment process.
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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Wah Wah Wah
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24 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…