top of page

Selecting Tickers for the Wheel or Covered Strangle

I saw a post regarding the “best” tickers to look at when trading the wheel. Obviously, we know “best” is relative and what’s good for someone might not be right for someone else.


While, I don’t trade the wheel much, I do trade the covered strangle, a sibling to the wheel. The primary difference being nit picky vernacular and the deployment of additional cash secured puts while we have the covered call side working.


When I think about tickers, there are a few inputs that lead to different priorities. This is by no means an exhaustive list but a few of the higher level questions and subsequent trade offs.


1. Premium. Some tickers will inherently have higher relative premiums, namely due to increased beta (or volatility in price). Do you want higher premiums? Do you want more price stability.


2. Weeklies. I prefer securities that offer weeklies to enhance flexibility. This immediately decreases the pool of candidates available to me.


3. Equity “type”. Do you want a well defined large cap stock? Perhaps it’ll be closer to market beta and pay a dividend, but most won’t have huge capital gain potential, like a growth stock for example. Do you want a dividend and stability? Or do you want greater upside potential?


4. Simplicity. More often than not, at this point, I primarily deploy with index and sector ETFs for the covered strangle and most of my core strategies (different from speculative for me). The trade off I’ve accepted is lower overall capital gain potential AND lower relative premiums (overall reduced capital efficiency) for reduced unsystematic risk (earnings releases, etc), less time to analyze and manage/hedge (greater time efficiency).


I thought it was an interesting convo and one that evolves for me based on the needs of my portfolio. Most things in trading include a trade off, just gotta find the right balance that meets our objectives.


Be an Outlier!

Erik

Recent Posts

See All

Don’t Trade

If you don’t have a written plan. The goal of this post is to share personal mistakes in my early trading to hopefully encourage others down a different path. People tend to hate those kind of stateme

Path to Options Proficiency

For the new traders, whatever you do, do NOT allow the disenfranchised internet trolls dissuade you from learning and asking questions. The goal of this post is to encourage new traders to stay the pa

You're ALONE

For the first 3 years of my trading, I kept no logs, had no written plan, and did what most do. I thought I was careful, consistent and wouldn't need to write things out because unlike the millions of

Comments


Post: Blog2_Post
bottom of page