Master the Art of Selling Cash-Secured Puts and Covered Calls
Welcome to Just Keep Rolling! This website is dedicated to teaching you the wheel strategy, a powerful method for generating income by selling cash-secured puts and covered calls. Our focus is on the concept of rolling options to collect theta and minimize risk.
The wheel strategy involves three main steps:
When your options are about to expire in-the-money (ITM), we teach you how to roll them for a credit, reducing risk while maximizing your returns.
Scenario: You sell a cash-secured put on a stock trading at $50 with a strike price of $48, collecting a $1.50 premium. The option expiration is approaching, and the stock is now trading at $47.50. This means the option is ITM and likely to be exercised.
Solution: Instead of allowing assignment, you decide to roll the put option. You buy back the current option and sell a new put option with a later expiration and the same strike price ($48), collecting an additional premium of $1.25.
Outcome: By rolling for a net credit, you extend the trade while collecting more premium. Your breakeven point improves:
Scenario: You own 100 shares of a stock trading at $60 and sell a covered call with a strike price of $65 for $2. The stock rallies to $66 as expiration nears, and the call is ITM.
Solution: To avoid having your shares called away, you roll the covered call. You buy back the $65 call and sell a new call with a later expiration and a strike price of $67.50, collecting a $1.50 premium.
Outcome: You keep your shares, extend the trade, and collect more premium:
Scenario: You sold a cash-secured put on a stock with a strike price of $30, collecting a $2 premium. The stock drops to $25, significantly below your strike price.
Solution: Instead of being assigned, you roll the put down and out. You buy back the $30 put and sell a new put with a strike price of $28 and a later expiration, collecting a $1.50 premium.
Outcome: While your strike price has been adjusted downward, you maintain the trade and reduce potential losses:
Step 1: You sell a cash-secured put on Stock A with a strike price of $50, collecting a $2 premium. The stock drops slightly to $49, and you are assigned the shares.
Step 2: Now owning 100 shares of Stock A, you sell a covered call with a strike price of $52, collecting another $2 premium. The stock stays below $52, so the call expires worthless.
Step 3: You sell another covered call, continuing to collect premium while reducing your cost basis.
Rolling Example: Suppose Stock A jumps to $53 during the next expiration cycle, and the call is ITM. Instead of allowing your shares to be called away, you roll the call to a later date with a strike price of $55, collecting an additional $1.50 premium.
Outcome: Over the course of these trades:
Benefit: By rolling options and participating in the wheel strategy, you generate consistent income while minimizing risk and managing exposure.
Rolling options allows you to:
Get started today! Learn the strategies that professional traders use to stay profitable.
If you have any questions or want to share your experience with the wheel strategy, reach out to us:
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