The Proprietary Safe Wheel Strategy (Mon. 01/31/2022)

Good morning and welcome to my real time options trading, where I trade a real account with real money right in front of you.  Now I’m totally transparent as I share my account value live on screen, and I’ve been trading options online for 28 years now.  And I’m here to share how it’s possible to trade options with less risk and how you can even follow my trades if you choose to do so.

I must say that trading is risky and it is possible to lose money following my trades.  My purpose is to help people learn how to trade a proprietary trade I developed called the Safe Wheel Strategy.  The wheel strategy, as it’s known today, is a popular strategy but it comes with major risks, and I’m here to help people learn a wheel strategy that does not carry all the normal risks.  Now, I’ve seen people follow the old school wheel strategy that many Youtubers tout only to end up becoming frustrated and lose money.  

If you’re interested in a conservative effective approach to trading options for free, you’re in the right place.  If you’re interested in the back-test results of the proprietary Safe Wheel Strategy that I developed, I’ve made a video on that and I left a link in the description.

Okay, so let’s get started.  You can see the stock that I’m trading here is Macy’s.  And it’s trading around $24.25.  The stock that I use, I could have used any stock really that gives me a decent premium, even if I was trading like $AMC, I believe it was $AMC that was around $30 at the beginning of the year now it’s at $16.  That would have been fine.  

I probably would have been out of it by now and, you know, picked a different stock, something closer to $30 but I would have more than likely been ahead.  But okay, so one thing I wanted to say is if you guys have any questions go ahead and start typing those into the chat now that way we’re not kind of waiting at the end.

So here’s my current positions, I have 100 shares of Macy’s stock.  I was assigned at $25.  And I have my put hedge on which I still have and so what I’m going to do is I’m going to see if I can still obtain premium above the $25 and I can get at least 1%.  So let me take a look and when I talk about premium, I’m talking about the nearest, the one that expires on Friday, this particular option cycle. 

So when I look at the $25, obviously I can get enough, but I want to get out of the money and also be able to get at least, what is it, $0.25.  So $0.25 or better.  So I could actually go to the $26.50, but if I get called away at $26, I’d be happy because I’d make profit.  And then I’ve got that, you know, that’s a pretty juicy premium right there.

So, I’m actually going to go for the juicier premium; even though I could technically go for the $26.50 here.  I’m going to take that juicier premium so I’m going to go ahead and sell a call, a covered call.  I’m going to sell this one here.  I’m going to do one because I have 100 shares.  So I’m going to go ahead and execute that.

So $0.43, I’ll try to get a little bit more.  Okay, maybe I’m gonna get $0.44, $0.44, maybe $0.43.  Okay, now it’s chasing a little bit, that happens.  Okay, so I filled there.  Now, I have my covered call, my premium for the week.  

And now, I have this put hedge and I need to hedge my hedge.  Okay, so I’m going to buy something around $0.05, $0.06.  So the $28.50, you know, pay $5 or $6 for that.  I’m gonna buy one of those, one of those, calls.  I wouldn’t pay$7 but $6 I’ll pay, you know, around $5.

Okay so now I’ve got my premium for the week, you know, when I have these 100 shares.  So we’re just basically completing the wheel; doing the covered call portion of the wheel, but this is The Safe Wheel, so as you can tell, the market’s down pretty good and all that stuff going on, but this Safe Wheel is not going to be a big, you know, you’re not going to see a lot of volatility in this account.  You can see here it’s up $200 starting at $5,000.  

Okay, so let’s see if there’s any questions.  Let’s get into any questions that we might have.

[John Vizcarrondo:]  In your back-test, let’s see here, John: in your back-test, when did the strategy lose money?  So it loses money when the stock goes up and then it goes back down and the put hedges are not as mature.  And they can’t really cover when it’s when the stock goes back down.  So there are times when you’ll take a loss, see that, I call this a cycle so I’m in cycle number one still.  Actually I’m in cycle number two because, if you remember the first week, I got totally out and I started over.  So I’m in cycle number two.  So some cycles will lose money, but overall they’ll come out ahead.  I hope that answers your question. Okay, next question here.  

I’mtheone who knocks:  What trading guru are you reviewing next time?  That’s not part of this live stream, so I’m not gonna talk about that right now… Okay, same question. 

[TheAnhhai:]  How upscale to a larger account?  How can we scale to a larger account?  Well, I’m trading basically an account worth about $5,000.  So if you’re trading a $50,000 account you would do 10 contracts.  If you’re trading a $100,000 account you would do, what is that, 20 contracts.  So that’s how you would scale it up.  So this is for every $5,000.  This is how many one contract for every $5,000.

Okay, here’s John [John Vizcarrondo]:  eventually the hedge theta starts getting serious–when do you roll the hedge?  So I will roll the hedge when the mark when, the underlying, goes up higher and the hedge is not close enough to the strike price.  Usually when it gets around 70%, it gets a little too far away.  I’m not going to say 70% is an exact number, but when it gets too far away I’ll roll it up.

Okay, [from The Underground Sausage]:  screen is kind of blurry, what is PnL so far?  P&L is $5,213.  So I started with $5,000 even in the beginning of the year, so it’s up $213.  

[Ben Mullins:]  When picking stock for the strategy, did you see a optimum range of IV % or rank?  No, I didn’t really use IV rank, I kind of looked at if I go out of the money a strike or two or three, can I pick up that 1%.  Would $TSLA be too volatile?  The problem with $TSLA is I like to have stocks that are around that $30 range because then I can use my sizing appropriately.  So I can use a $5,000 account and use one contract for every $5,000.  Now, if I was doing a $TSLA, I’d have to resize everything.  So it is possible to do it with $TSLA, but then I’d have to resize it and that would be different.  And $KO, I’m assuming Coca-Cola, but I, you know, again I want to be around that $30 range so my sizing is appropriate.

All right, The Underground Sausage: awesome!  Awesome.

Let’s see what we have next, [Mark Juengling:]  if you wanted to scale up would you do 5 put contracts, would the hedge go up to 15 and the call to 5.  Yes, if I was using $25,000.  Yes, about $25,000.

Next question.

[Ian Coggon:]  So are you looking for 1% per week return?  That would be ideal but that would be like a perfect scenario but it doesn’t work out that way because sometimes a cycle will take a loss, but yes, that would be the goal, but that’s not going to happen.

Define Risk Investing Dot Com, interesting.  Okay, I got here a little late, is this a new trade or was this an existing trade I had on?  So what I had on was a 100 shares and I had my put hedge on so I just continued the wheel with the covered call and I bought a long call.  The strikes in expiration so it’s expiration in a week from now or on Friday, and the strike that I sold, the call that I sold, was the $26 call.  And the call that I bought was a $28.50 call.

Okay, now I get a lot of questions about “can you show me the whole thing at once” and so what I’ve decided to do is, possibly–I haven’t made 100 commitment on this–I’m wondering if you guys would like this if I put together a flow chart of how this worked.  And I would sell it, you know, $259 but I was wondering if there’s a demand for that.  

I feel like there is because people keep asking me, you know, what’s the whole total trade plan and everything.  Well, you know I could put a flow chart together and make that available.

Here’s another guy John [John Vizcarrondo]: thanks for the strategy!  You’re welcome.

Okay, here’s [Mark Juengling]: do you monitor this trade during the week or just look at it after the expiration date?  That’s a very good question because on Fridays I do need to take a look at that long call, and if that long call is in the money, I need to sell it and take my profits from it.  And I don’t know if I’ve ever mentioned that yet, but I do take a look at this on Friday, so if I pop up with a live stream it could be on Friday.  Kind of an unexpected live stream.

Ian likes the idea.  [The Underground Sausage:] flowchart is best for visual learning.  Good.

Okay, let’s talk about my Earnings Edge.  Let’s see what the results have been with that.  I’m going to go into my other account here, because this Earnings Edge account started with $5,000 also, let’s see.  

Okay, so we can see what the results.  I don’t know if that’s too small for you guys to see.  Basically, I have, I aim for $300.  Okay, so I have $150 winner that’s like a half winner.  It’s Macy’s trade, again, that has nothing to do with The Earnings Edge.  That was just money that was a position that got taken out of the account and put into the other account, so that’s not exist.  That doesn’t even reflect the P&L.  We got JPMorgan, where I took a loss; not quite $300 loss, but we could call that a full loss.  And then we’ve got Bank of America, we took a half loss.  And then last week, I got $BABA where I basically broke even.  

So I’m working my way up here.  I’m looking to try to win three out of four trades with this system.  And currently, I’d say I’m down one trade but you see my P&L is $4,559 starting with $5,000.  So you’re going to see volatility in this account but I do expect it to to come up pretty good, but you know, it’s $4,559 so that’s what it is.  So that’s for The Earnings Edge.

I have another comment here.  [Ian Coggon:]  So you sell the assigned shares once the price goes above the price you were assigned?  Yes, if I get called away.  And I’ll start over.  If I get called away I typically start over.

But there you have it for today.  I just wanted to go over, let’s see, okay.  So Vicus has a little

thing here… it’s a little bit, you know, he calls Marcus a coder… something that I don’t want to put on here; otherwise I would put it here. 

Okay, so there’s another question or another comment here by Ben [Mullins]:  my question was just around volatility criteria in the stock selection…  I know they wouldn’t make sense for your account size?  So the volatility selection, again, comes down to how much premium can I get and I want to make sure that if I’m out of the money, I can get at least 1%.  If I can’t then the volatility on the stock is too low.  I don’t believe the volatility can be too high.  You can use the really high volatility stocks and this system should work, but I’ve used kind of medium, medium, volatility stocks in my back-testing and live.

[The Underground Sausage] says, “alleged.”  I’m not sure what, okay.

Kevin, good morning.

Oh, alleged.  Okay, so we’re talking about Marcus; alleged scammer.  

Okay, [from] Ian: have I tested this on ETFs?  Yeah, actually part of my back-tests were I used EEM, I believe it was EEM.  So yes, is the answer to that.  Also, when you choose an underlying you want to make sure that they’re extremely liquid, the options are extremely liquid.

Okay, let’s see if there’s any other.  So next week it is possible that I’ll have a link in the description for anyone that wants to purchase the flow chart for this.

Okay, I think that’s all the questions for today.  So we’re gonna go ahead and end the…

Oh, so Ben [Mullins]:  do you have any plan rules written up available?  Yes, so I was just talking about that, that I have a flow chart put together for $259 and most likely I’m thinking it’ll be available next week.

Okay, so I’ll be back possibly on Friday, you never know; but I’ll be back on Monday 7:15 a.m.


Link to my Earnings Edge Alert Service

Link to My Safe Wheel Back Tests GO TO 6:55

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