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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!


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