Dan explains why execution price is the one place retail traders truly “compete” with market makers and how improving it can dramatically reduce slippage, the biggest hidden cost in options trading. You’ll learn how market makers manage risk (delta-neutral hedging) and why they demand compensation through the bid/ask spread, plus practical tactics for middling markets, using resting orders and handling illiquid options without getting trapped by wide spreads.

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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Dan breaks down the real costs of trading and why commissions, while worth managing, are rarely the biggest threat to your returns. The true hidden expense is slippage, driven largely by liquidity. He walks through how to evaluate option liquidity using bid-ask spreads, size, volume and open interest, and sets the stage for mastering the critical execution skill of middling the market.

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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Dan explains how wheel-style covered calls can turn “meh” or even speculative stocks into strategic, risk-managed income plays through cumulative premium and even share-loan income. He also explores the often-overlooked reality that trading is a business with costs, especially taxes, commissions/fees and slippage. He shares two real trade stories to show how premium collection can create downside cushion and discusses practical tax considerations.

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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Dan shifts from cash-secured put “double threat” setups to covered calls, especially the skate objective (keeping premium without assignment). He explains why technical analysis is often the most practical way to add edge to covered call strike selection, particularly by using resistance, momentum tools like RSI and realistic range expectations. He also walks through how to sanity-check any setup with annualized yield and what to do if the stock runs through your strike (accept assignment vs. roll proactively).

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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Dan tackles a common complaint he hears from traders: “The wheel doesn’t work.” His take is straightforward: When wheel trades are placed without clear standards for strike selection, premium adequacy and outcome planning, they can absolutely “suck.” He shows how to build better wheel setups by using annualized return metrics (especially skate yield) and by designing trades where either outcome, skating or getting assigned, can be a win. 

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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Dan lays out the core performance metrics that help wheel traders evaluate, compare, and improve covered calls and cash-secured puts. He explains why isolating the option component of returns matters and why annualizing turns “apples to apples.” He also introduces a powerful long-term concept, the cumulative discount effect, where repeated premium collection steadily lowers your effective risk over cycles.

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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Dan takes a critical but balanced look at backtesting and why it often leads traders astray, especially when it comes to strike and expiration selection for covered calls and cash-secured puts. Drawing on decades of experience and firsthand work with traders and developers, Dan explains why backtesting tools have structural limitations, how those limitations create misleading conclusions, and why discretion, objectives and real-world market structure still matter far more than “optimal” backtested metrics.

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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Dan ties the wheel strategy to New Year’s resolutions, emphasizing that the wheel only works when it’s traded consistently and in cycles. He explains how to systematize the process so it fits into real life—reducing friction, minimizing time demands and making long-term wealth building sustainable.

Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com

Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com

Subscribe on your preferred platform and leave a review to help more traders discover the show.

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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Dan puts implied volatility in its proper place: It’s not the single most important factor in wheel trading, but it meaningfully improves outcomes over time. Using a field-goal analogy, Dan explains how volatility analysis adds a “little edge” on each trade that compounds across many cycles. He then goes deeper into when volatility matters most, plus a practical framework for evaluating whether selling puts or calls into earnings creates a favorable “sweet spot.”

IV is an edge, not the core driver. Underlying price movement and theta are usually more influential in wheel outcomes, but IV adds incremental advantage that compounds over time.

Active and passive wheel traders use IV differently. Active traders may require confirmation that options are overpriced; passive traders may prioritize keeping the cycle going and capturing the long-run risk premium.

Humility matters in volatility forecasting. You can’t know with certainty whether options are mispriced until after expiration, so rules-based processes help reduce overconfidence.

Regime awareness beats day-to-day noise. A few low-IV days are normal; weeks or months of a pattern can justify sitting out or adjusting tactics, especially in strong rebound “freight train” markets.

Extremes cut both ways. Slightly high IV can be attractive for selling, but extremely high IV may signal risk you don’t understand.

Earnings setups can be evaluated objectively. Compare historical earnings gaps with the option’s break-even/indifference “sweet spot” to judge whether premium meaningfully compensates for the expected move.

If selling calls to exit stock into earnings, assignment probability matters. At-the-money or slightly in-the-money calls can improve assignment odds and provide more downside cushion, but the true advantage comes from time premium, not intrinsic value.

Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com

Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com

Subscribe on your preferred platform and leave a review to help more traders discover the show.

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

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

dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/ 

-- License: Attribution 3.0

Dan explains why wheel traders must think about technical analysis differently from momentum or breakout traders. Using a Home Depot analogy, Dan shows how the right tool for the job matters—especially when selecting indicators for skate-objective trades. He dives into oscillators (with a focus on RSI) and introduces a new strike-selection concept he’s developing.

Wheel traders don’t want momentum. Strong trends often force rolls, increase trade count and slow down wheel cycles.

Technical analysis should reduce activity, not increase it. The goal is fewer trades per cycle, not more signals.

Oscillators are better tools for wheel traders. Indicators like RSI help identify waning momentum rather than breakouts.

RSI can improve strike selection. Overbought and oversold reversals—and divergences—can increase the odds of skating successfully.

Indicators don’t predict the future. They provide a small statistical edge when used correctly.

Volatility matters as much as price. Understanding whether options are overpriced or underpriced is critical for consistent income strategies.

Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com

Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com

Subscribe on your preferred platform and leave a review to help more traders discover the show.

Next Episode Preview: Next time, Dan goes deeper into volatility analysis, expanding on how wheel traders can evaluate implied volatility, historical volatility, and upcoming catalysts to improve covered call and cash-secured put decisions.

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

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

dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/ 

-- License: Attribution 3.0