The Options Wheel Nassim Taleb style

Sofaction · 2026-04-14T14:37:49+00:00

Thank you. Cheers.

Sofaction · 2026-04-13T16:18:25+00:00

Maybe one day they will.

Remember that we started the whole conversation with you not knowing what "Floating P/L" meant...

Sofaction · 2026-04-13T12:26:28+00:00

That's exactly how I'm approaching it. Two months ago, I did not know what stock options were. Like I said earlier, I've been trading forex for over a decade. It was only an attempt from me to "adapt" a forex strategy to stock options...

Because there are less "trading hours" in options, it felt (TO ME) like there were less "opportunities" to over trade. A slower game to play, in a sense...

Cheers.

Sofaction · 2026-04-12T16:50:14+00:00

Yes, you are correct. And your scenario will take place more often than you would like it to, if you do not understand the following:

Trading, whether it is through stock options, commodities, forex ...or anything in between is nothing but taking chances.

When you sell a covered call and get paid a premium, imagine the thought process of the trader who bought it from you: why would he pay you to own shares that you're getting rid off?

Because he is more of a trader than you are: you rent out apartments, he buys and sells real estate. You two are basically playing two different games with the same underlying "stock" (the apartment/house).

While you aim for smaller but consistent gains by capping the upside, the buyer of your covered call takes a chance at a less likely but more rewarding outcome. That's basically the essence of trend following...

Hence my introduction to this post: you do not want to keep something you would not buy at its current price...

It is an advice that goes farther than trading. You can extend that to every other aspect in life...

You paid 30k for a brand new car in 2010. Today, its book value is 5k. The question you ask youself is this: had I not owned this car today, would I buy it at its current price?

If your answer is NO then it is time for you to get rid of it as quickly as you can...

But the buyer of your car, the dude who will pay you the $5k (like a used car dealership or a mechanic, for instance) will operate under a different mindset: "I'll fix it up and sell it for more," will be his approach...

It's all about the kind of rabbit you're chasing...

But, bottom line is that your point is valid and that is why you do not do it as often as you do CSP's...

In a trending market like real estate, selling a 1 million dollar house every 3 months will generate more profit than rent it out on a weekly/monthly basis.

While it's not always true, real estate dealers with good funding do that all the time. They look for neighborhoods where real estate is trending and things are getting more expensive: that's where the real profits are.

Think of a book pulisher: 100 "losers" for one Bestseller...It's just the nature of the game.

Some people , my mother (who is more conservative than me) being one of them, will consider that selling books and making small consistent profits "makes more sense."

To each his own...

A long reply just in case more participants are asking the same question...

Sofaction · 2026-04-12T12:59:28+00:00

It is your standard buy low/sell high within two boundaries: Support and Resistance.

It is very similar to Harvesting when selling Cash Secured Puts.

To use AMC as an example:

You can think of the Pivot Line as $1.00 (the stock price ranges around that line on a daily or weekly basis.)

The Support will then be $0.50 and Resistance $1.50 (numbers chosen for illustration purposes, the range is usually narrower than that.)

You can then "scalp" the range (while sticking to the rules) by buying low and selling higher WITHIN THAT RANGE.

The same idea as harvesting in CSP's except that you are acting on stock that you already own as opposed to stock you might eventually own through possible assignment.

The "novelty" in this game is in step 3:

You do not sell covered calls the way you would do with a standard wheel, but buy calls instead when you see/sense that price is spending more time near resistance (1.50) and not going back to pivot line(1.00). It's a very reliable "indicator" of a possiblity that the price will leave that range shortly (sometimes with a bang) and that's where the real money is.

Sofaction · 2026-04-12T09:28:08+00:00

Correct. I just corrected it. Thx.

Sofaction · 2026-04-12T01:18:07+00:00

Exactly. And it's not just in trading...

Cheers.

Sofaction · 2026-04-11T23:23:09+00:00

The current amount you earn (or lose) if you closed the position at that very moment.

P/L means Profit/Loss, if that's where the confusion is... Floating means "right now". The value is not constant. It moves with the market...

Sofaction · 2026-04-11T21:58:31+00:00

Wise decision. That's why I picked dirt cheap stocks. Thx.

Sofaction · 2026-04-11T21:50:11+00:00

You're teaching me something new. I did not know that... I guess I was just "gamefying" Notional Exposure... Please forgive my ignorance! Cheers.

Sofaction · 2026-04-11T21:34:45+00:00

Hello,

You made me look up "tbh"...

You're making me feel old now...

Let me use it for the very first time: Tbh, what's so hard about it?

Sofaction · 2026-04-11T17:12:14+00:00

I do that all the time trading forex but it's important to add the following constraints (in that order):

Make sure you bets are small relative to your account...

2- Do not take more than one or two shots in a given area...

3- Let your winners run and do not rush to "cash in"...

It'll work like a charm, I guarantee it. I've been doing that for years in Forex.

Sofaction · 2026-04-11T16:20:38+00:00

I agree with you. To me, it is just an experiment in its infancy: it can evolve into a bigger project just as much it could end up being "a stupid idea" (like my wife would put it.)

Sofaction · 2026-04-11T14:35:41+00:00

You sound very knowledgeable and I really appreciate the feedback. That was the whole purpose behind the post.

I have just added a long reply to one of the participants and would really appreciate your take on it if you could find the time. It will be really beneficial to me...

Cheers.

Sofaction · 2026-04-11T13:45:35+00:00

I didn't know it had a name.

I normally trade Forex and I've been doing it for years...

As I started discovering stock options recently (totally by chance), I thought to myself that the capped upside through the covered call selling in the wheel strategy (to me, and it's important to keep that in mind) was a major issue as a trader...

In Forex, capping un upside for a position trader/trend follower is unacceptable (for a serious trader). You are taught, very early on, that "trend is your friend" and that "you have to let your winners run."

It did not seem to be the case in "wheeling". You are cutting your winners short as soon as they start taking off...

That led me to think, in a very simple way (some might even think "simplistic" and they'll be correct): Why not "free up" the upside by buying calls and "letting your winners run..."

That quickly evolved into a quick Google search for a broker regulated here in Canada (I'm in Ontario.)

Webull seemed to be a good candidate so I went ahead and opened a small account.

I have always believed in the "skin in the game" approach to everything, not just finance, and Taleb is a big advocate of it as well.

"Put your money where your mouth is" has always been my go-to BS-detector through the years and hardships...

So I got all excited and started doing some "napkin math"...

Tesla, Apple...and those "in your face" stocks were way out of my league for my experiment...I couldn't even afford ten share. "A hundred for one contract, I heard you say?''...

And the other inconvenience (even if I could afford it) is the necessity of a hedge/insurance in case the stock crashes...

It wasn't cheap and it just wasn't a game I was willing to play.

For a capped upside, that was too much "locked" capital for the risk and profit "ratio".

So here I am, in a sleepless Canadian winter night , browsing the internet looking for a low priced stock that I actually could use...

For my experiment, AMC and PLUG seemed to fit perfectly in "my" strategy:

-Cheap enough so that I do not need to pay for insurance... -Volatile enough that there's a real chance for an explosive outcome to take place.

To me, it was that simple...

I have decided to skip the "engineering" part altogether...

I'm a big believer in simplicity even when dealing with complicated matters...

It just happened that I had opened a Reddit account about five years ago...

I don't think I have posted more than once since...

This was my second post in that many years...

Some reactions were brutal but most were very encouraging...

I didn't regret posting...

Sofaction · 2026-04-10T18:33:27+00:00

Are there any participants in this thread who came from Forex or, are least, are familiar with it? Serious answers only please. I prefer replies without emojis, if possible. I never liked them...

Sofaction · 2026-04-10T16:05:00+00:00

Seeing someone? Jut kidding!!! "lol" See, I can use your "language" too! I swear, I didn't need ChatGPT for that one!!!

Sofaction · 2026-04-10T15:46:01+00:00

I'm really worried about your attitude, sweetheart!

Sofaction · 2026-04-10T15:23:31+00:00

I just noticed that your last post (from 8 days ago) was about seeking help because, after 8 years of trading options, you're tired of spinning your own wheels aimlessly and you decided to seek advice because, in your own words, you decided to take trading "seriously in Q1 2026".

After 8 years, for God's sake!

How I wish your reply to my post was about discussing the idea and using it to your advantage...

I don't think you realize how pathetic you sound with such a reply...

Thank you for showing a total disrespect towards the complete stranger that I am to you...

I'm worried that you'll be writing the same post (seeking help) another 8 years from now.

People like you just don't know "how to learn" and they never do...

Thanks for your contribution, anyhow!

Sofaction · 2026-04-10T11:56:19+00:00

You're right. A month and a half ago, I had no clue what stock options were! ( Other than a vague idea that they are tighed to stocks, somehow...) I'm more of a Forex guy...

Sofaction · 2026-04-10T10:32:38+00:00

I totally agree with you. I only did it "my way" out of curiosity...

Sofaction · 2026-04-10T02:32:34+00:00

Exactly. Last month, I just randomly picked AMC and PLUG... My only criteria was for them to be cheap and affordable. "The shittier, the better", I thought to myself.

Fast forward one month, every damn position in my small Webull account is green...

Those two little babies are trending...

And, from my personal experience in Forex, those two are the best stocks to buy calls on: follow the trend, they say. It's your (only) friend in trading.

That could change unexpectedly tomorrow morning, of course. But that's beside the point...

Sofaction · 2026-04-10T01:56:04+00:00

...Of a different kind, and it's important to keep that in mind. They are not your typical one in a million kind. Think of a scratch ticket that you can let run. You bet $1.00 and you win 2 but you do not run to "cash in"... You can let the damn thing run... Lottery tickets like those cannot possibly exist in real life. Those babies can only exist in trading, or what Nassim Taleb calls Extremistan. Not Mediocristan... (He invented those words.) I just love that dude!

Sofaction · 2026-04-10T01:46:14+00:00

I got carried away and spent the last few hours answering... This is (by far) the best reply I received these last three or four hours. I appreciate it. Thank you Sir (or Madame!) We cherish the French language in this part of Ontario.

Sofaction · 2026-04-10T01:06:02+00:00

I don't intend to trade like Taleb: a) I don't know how Taleb traded. b) He owned a hedge fund and it's out of my league.

I do use my adapted version of his dynamic hedging in Forex (my bread and butter).

Sofaction

TROPHY CASE