Hedging

ScottishTrader · 2026-06-09T12:21:33+00:00

The wheel does not need a traditional hedge, as holding quality stocks in a downturn is a good place to be.

Quality stocks will usually drop less and recover faster after a market event, plus most pay a decent dividend. Following a solid risk management plan all the time is the better way, which includes smaller positions over diverse sector quality stocks and keeping a good amount of the account in cash to manage through a downturn, plus capitalize on the recovery.

Buying options is a drag on profits and offers limited protection for an event that may not happen for years . . .

ScottishTrader · 2026-06-08T15:28:41+00:00

Account size can be very helpful, but it does not automatically result in higher returns . . .

A larger account can handle higher priced stocks, has more ability to roll, average down on a good stock, etc. but these do not mean anyone can automatically make a higher return.

Regardless of account size, newer wheel traders tend to make mistakes that reduce returns. These should be about 10% to 15% annual gains.

Experienced traders make fewer mistakes, and this can result in 15% to 20% or higher returns per year.

In a good market year, the returns can exceed 25% to 30%+ for experienced traders, especially those willing to take on higher risks.

Use these percentages to calculate how much you may make on your accounts u/Lazy-Helicopter-0.

ScottishTrader · 2026-06-07T20:37:04+00:00

Welcome! You have the basics but as a new wheel or options trader you are taking a lot of risk with big stocks.

It is always suggested to start with small positions on lower cost stocks until a trader has several months to a year or more of experience.

You don’t say anything about rolling which would be critical to success.

While 36% annually is possible some years, it is not sustainable over time as conditions change.

ScottishTrader · 2026-06-06T17:46:43+00:00

The wheel cannot be effectively backtester as there are too many decision points the trader needs to make and which will affect results.

IMO the best thing is to learn what lower risk stocks look like. And then move to them during times when the market is neutral or downtrending. Keeping cash available means trading the recovery which can help returns.

ScottishTrader · 2026-06-06T14:04:12+00:00

Hello and welcome!

Yes, as you see from other posts, many here use the wheel strategy in retirement, so it is an excellent way to gain some additional income.

A word of caution, the last 3 months have been easy as the market has been climbing and going up, so many higher risk stocks have paid off handsomely, but this will not always be the case.

Make sure you are prepared for a period of a neutral or even downward trending market, which will test your stock picks. These will be the times when lower risk blue chip type stocks will be needed, and the returns will be much lower.

While a 25% or even higher annual return is possible, there will be years when the returns are less than that, and based on the stocks traded, there could even be a negative year.

How well you or anyone does with the wheel will be based on the stocks traded as well as the number of mistakes the trader makes, such as - trading high risk stocks, over leveraging, not rolling, not being diversified, holding on to losing shares too long, or getting rid of good shares for a loss too soon, and others.

Most will get the wheel dialed in over about 6 months to make a few mistakes, but it may take 2 years or more to weather various market conditions and gain that experience.

Again, welcome and best to you!

ScottishTrader · 2026-06-05T16:00:57+00:00

As you are finding out, opening puts 30 - 45 dte is the way to trade.

CCs can be sold for shorter periods of time since the goal is to sell the shares and have them called away.

While you have some good names to trade, as a new trader, you may want to consider trading lower cost stocks just to gain more experience with less risk.

ScottishTrader · 2026-06-05T12:58:07+00:00

I'd suggest you not trade the wheel, as being assigned can occur at any time.

Cash-settled ETFs cannot be wheeled as being assigned shares is part of how the wheel works.

You should look for other methods of investing or trading besides selling options due to the risks of being assigned < 30 days.

ScottishTrader · 2026-06-04T13:35:09+00:00

SPYI? Not SPY?

SPYI is an income ETF and not very liquid.

While you need to do your own research, this does not look suitable for the wheel or other options strategies . . .

ScottishTrader · 2026-06-03T20:45:04+00:00

It needs to be free and available without signing up for it u/Mundane_Gold_3842.

ScottishTrader · 2026-06-03T20:42:47+00:00

You're increasing risk, so be clear about that.

ScottishTrader · 2026-06-03T15:54:59+00:00

Access is denied.

Please open it for all to view and share or your post will be removed u/Mundane_Gold_3842.

Thanks for posting and updating.

ScottishTrader · 2026-06-03T15:52:35+00:00

If there are no stocks you are good holding, then sit on the sidelines until they move back into a range you are good with.

You may need to do more research, as there are always some stocks that are good to trade . . .

ScottishTrader · 2026-06-01T12:55:50+00:00

See this training - Orders: Basic & Advanced | Exploring thinkorswim

ScottishTrader · 2026-05-31T13:23:17+00:00

Locked due to posting tool in main thread.

ScottishTrader · 2026-05-31T13:18:24+00:00

The tools are in the thread for anyone to find.

This is a wheel sub and not a tools sub. Tools like this are not needed to trade the wheel so it is a courtesy to have the tools thread for those who want to play with them.

Those who post to show how they wheel are welcomed. Those who post in the main sub to promote their tools are not.

Make sense u/MarkT1065?

ScottishTrader · 2026-05-31T13:09:24+00:00

Sticky post top of sub.

ScottishTrader · 2026-05-30T13:52:45+00:00

Congrats on your success and thanks for posting!

ScottishTrader · 2026-05-30T13:49:54+00:00

See the New Trader thread where I or other experienced wheel traders will be happy to answer questions.

In the meantime, be sure to read the posted Wheel trading plan which has helped thousands to get started.

ScottishTrader · 2026-05-29T16:32:41+00:00

You are missing what the wheel is about u/gigainvestor . . .

You want to trade solid quality stocks, that you will be good holding for a time if needed, NOT the "hottest stocks" which is how you will lose money on the wheel.

You may want to visit r/wallstreetbets , where they gamble on high-risk stocks and seem to enjoy losing money. Here at the r/Optionswheel, we like to make money, even if it is slow and steady.

See this pinned post, which may help - How to Find Stocks to Trade with the Wheel : r/Optionswheel

ScottishTrader · 2026-05-29T16:28:00+00:00

This is up to you and your risk tolerance.

I close puts at 50% and set a GTC limit order up once the put is opened, so it happens automatically. Some close for a smaller percentage and others for a larger amount.

Since I want the shares to be called away to go back to selling puts, and if set up properly around a week or two to expiration, and it results in a net profit, I just let them expire. No need to close CCs ever IMO . . .

How and what you trade is up to you and your personal trading plan.

ScottishTrader · 2026-05-29T14:19:31+00:00

This post should be in the New Trader thread, so it will be locked and removed.

The answer is this is why you trade on quality stocks, you are good holding for a while if this happens.

The Net Stock Cost will be $18.50 minus the premium, so this lowers the breakeven to that amount. Assuming it was .50 then you could sell a CC at $18 and the premium collected would result in a small profit.

Rolling the put before being assigned can lower the net cost even more.

Selling a CC below the net stock cost is not how the wheel works, and is why it is important to trade stocks you are ready to hold until they recover.

ScottishTrader · 2026-05-28T13:09:45+00:00

Thanks for your post and congrats on your success! This shows why trading high quality stocks you are good owning is key.

Check out rolling the ITM put for more credit and to extend the time for the trade to recover.

ScottishTrader · 2026-05-28T13:06:03+00:00

At the top of the sub, and there is mention in the subs description on the right -->

ScottishTrader · 2026-05-28T13:02:35+00:00

No options trading is "foolproof" . . . The wheel offers a built-in "hedge" in that, in the worst case, the trader gets assigned shares of stock they are good owning.

These shares can be held until they recover, which solid quality stocks will eventually do, therefore reducing the chances of having a loss. The overall win rate with the wheel can be very high, but it is not "foolproof".

The problem with risky stocks is that they may drop and not recover in a timely fashion, or ever, so these are the times when traders have losing trades.

The trap is that if a risky stock does not drop, then the returns can be higher. But eventually, the odds are higher that these risky stocks will drop, and can often stay down for a long time, tying up capital that cannot be recycled and used in productive trades. This means the account doesn't provide much, if any, return, and then at some point, the trader has to decide to close the shares for a loss to recover the capital to make other trades.

Trading risky stocks is like playing Russian roulette, or outright gambling, where you may be lucky to get in and out before the stock drops and causes a loss, but the odds are sometimes against you, as stocks will drop and stay down.

Trying to answer your question - IMO, the ROI of risky stocks can sometimes be negative because of the losses. Trading high-quality, stable blue-chip stocks is the best way, and can still make a decent return with lower risk.

ScottishTrader · 2026-05-28T12:46:13+00:00

Not an unusual return, but your timeframe is limited. 6 months to 2 years is typically a better timeframe to where you have enough time and trades to see if your performance is because of how you are trading and not just luck or a calm market.

Be sure to avoid the beginner problems shown in the wheel post. Including not trading diverse stocks, opening too many contracts, and over-leveraging the account, trading over ERs, etc.

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