How to Buy Low and Sell High in Today Market Using Options Wheel Strategy

Discussion in 'Options' started by winstonwee, Feb 19, 2021.

  1. Hi

    This is a topic that most are interest in. I am interested in as well
    We all want and love to buy low and sell high but it is easier said than done. In fact it is extremely diffcult to be able to do that.
    If you look at my portfolio I am always buying the stock at the high.
    We can use some technical analysis or candlestick pattern or macd to time your trade but that is at best to me 50/50 maybe I wasnt good enough

    Today market is at all time high most of the stock is at all time high so how do we buy low and sell high?
    Today I present you a strategy that you can achieve a buy low and sell high

    Wait for Stock to pull back a bit
    Sell a Cash Secured Put for 1% premium
    Roll the Put to a Lower Strike (not necessary step)
    Get Assign the Stock (buy low achieve)
    Sell Covered call
    Roll the Call Higher (not necessary step)
    Stock get Call away (sell high achieve)
    Repeat the whole process on other stock


    In Fact I have made over $5000 using this strategy in Jan 2021 and make over 50% last year trading this alone


    Winston Wee
    I welcome all feedback and comment and discussion
    Last edited: Feb 19, 2021
  2. qlai


    What happens when stock gaps and you get assigned at a price which may be 5-15% away from your strike? The price will be too far away to sell calls to be worth it.
    TooEffingOld and Option_Attack like this.
  3. then a different strategy have to be employed
    you may have to do a ratio call spread
    example you buy stock at $100
    it drop to $50

    you may have to buy 1 call at 60 and sell 2 call at 80 for breakeven
    then when market move to 80 you still can get out at breakeven, the stock dont have to move back to 100 to breakeven

    no foolproof way there is always risk, if you think the stock will come back (usually after bad news or stock market correction than is ok to wait a while) if you think the fundamental of the stock has change than you should discard the position away and recover from another stock
    .sigma and qlai like this.
  4. 2 video for you guy to watch

  5. Ancient "system" sometimes touted by scammers. Likely to do a little better than the markets in down to flatish conditions. And worse during strong bull runs.

    Does it work? Sure, but so does just dollar cost averaging. Higher percent gains can be achieved with more leverage, just like anything else. But at the cost of higher drawdowns and risk. There are several indices and funds (like $BXM) that show the effects of regular buy-writes over time. Compare their returns to SP500 and see if this is really worth it. Maybe it will be? Up to you...

    Edit: If you are selling or promoting any service on this site, please communicate with Baron for payment to be a Sponsor. Otherwise, you will be gone in a hurry.
    yc47ib, TooEffingOld and jys78 like this.
  6. sorry not to get into a debate if this can be compare to $BXM because what I am doing is on a higher volatile stock than S&P index or SPY for that matter,

    I am doing on high IV stock

    I do it on stable stock too

    but ultimately what we want is to diversified our portfolio. But I have to agree if there is a stock market crash like what we seen in the past (2020, 2008, 1997, 1987) I would be losing money. But i use very little leverage even when I am entitle to it. I use a margin account on thinkorswim but I keep enough cash to buy over the stock in full cash. So if there is a stock market crash I could wait it out (market always come back proven many times in history) or I may have to take a big loss. I dont know what I would do if that happen I hope I never have to find out
  7. SunTrader


    Naz went down 75% after Dotcom collapse. It came back mannnny years later.
  8. guru


    Keep in mind two things:
    1. “The Wheel” is an illusion since selling covered calls vs naked puts are identical when executed at the same strike. Yes, wheeling can make it easier conceptually, but if anyone wants to run backtests on this then they can simply test selling naked puts.

    2. It’s unprofessional to speculate, theorize, promote or use any method just based on fluff and good feelings, without backtesting.
    There are plenty of backtesting tools where you can demonstrate strategy performance over 10-20 years, without speculating and pretending that you know more than a professional backtest will show.
    “I have made $5000” looks amateurish without full stats, sharpe ratio, drawdowns, etc, shown over many years.
    Tradex, .sigma, ITM_Latino and 4 others like this.
  9. I agree with your post in general but I keep seeing people throw this "covered call == naked put" mantra and it's just not true :)

    The difference: when trading covered calls you also get dividends.
  10. ET180


    I've done that. To make $5k in one month with a $30k account, you must be using full margin. That's fine as long as the market keeps going higher. However, when I used that strategy (still do, but more selectively), I ended up carrying dead money junk in my portfolio for a while. Example, buying CHK at $7 that eventually went bankrupt. Buying KSS at $47, UAL at $80 / $65, WYNN at $115, and MPC at $80 only to watch them all drop substantially last February. Still holding though except for KSS...finally dumped that this week at a small profit considering all the calls I was able to sell against it.
    #10     Feb 19, 2021
    yc47ib and qlai like this.