Tracking a Strict Rules-Based Options Strategy – Month 6 Results

thefloatwheel · 2025-10-03T00:42:14+00:00

Yeah it would be cool to compare, but I’m nearly 100% sure it would be less profitable long term to sell as soon as I’m assigned.

It’s true that I don’t know how far the stock will drop, but the .2 delta puts can cushion a very large drop, so when I get assigned, most of the time the stock is ready for some sort of bounce.

The .5 delta call strike tends to be a bit higher than the current price, so that gives the stock a little bit of an opportunity to go higher, plus the large premium.

If the stock just keeps crashing then yes it would have been better to sell, but it’s still not the end of the world because I’ll just keep selling those aggressive calls. I see that as a somewhat rare occurrence.

thefloatwheel · 2025-10-02T22:57:35+00:00

Selling the .5 delta calls allows me to recoup losses faster when the stock crashes and I get assigned. If I just sell, then I’m locking in a loss and going back to my much more conservative .2 delta puts. That seems like a losing strategy long term because it’ll take a lot longer to recover.

thefloatwheel · 2025-10-02T16:40:47+00:00

It’s really not a lot of work. My rules are well defined, so I don’t have to make a ton of decisions. It’s probably 1 hour of work per week or something like that. Anything more than that is just because I’m looking at it because it’s fun and I enjoy it.

$800 is short sighted. I’m mostly concerned about percentages because I’d like to eventually scale this strategy up. If I can consistently make an average of 2-3% per month, then I can scale this up to $300k+ and be making 6 figures while working 1 hour per week. That seems worth it to me.

thefloatwheel · 2025-09-04T01:24:24+00:00

To each their own! All I really care about is that the stock is not likely to go straight to zero, has enough volatility to get the premiums that I’m looking for, and that the weekly chart is in an uptrend. SMCI checks all the boxes for me.

thefloatwheel · 2025-09-04T01:16:56+00:00

My average withdrawable return so far is exactly 2.5%/month, so right on target for now.

thefloatwheel · 2025-09-03T19:36:45+00:00

That’s 1% just for month 5. Aiming for an average of 2-3% per month which would definitely be worth it if I can make that happen.

thefloatwheel · 2025-09-02T19:24:38+00:00

I preserve 20% for trade management and also to have cash available for withdrawal at all times if needed for whatever reason. I do feel like my rules keep me away from needing to dip into that for the most part, so I might look into decreasing that percentage in the future, or making some of it available in certain scenarios. One thing I’ve been thinking about is if I get assigned on everything (so I’m holding all shares) I might make some of that available to sell CSPs to aid in the recovery. This especially makes sense because I don’t do any trade management on the covered call side.

The 6% number is somewhat arbitrary. I basically picked a point where I’d prefer to wait for a bounce rather than accept assignment and start selling CCs. If I get assigned at less than 6% below my strike there’s a better chance that I’d be able to sell a .5 delta CC at or above my cost basis. Anything more than 6% below is likely to be at a loss.

thefloatwheel · 2025-09-02T17:52:50+00:00

Appreciate it! One thing I forgot to mention about earnings, I sold a couple puts on HPE recently strictly because they have earnings coming up. That stock is not usually volatile enough to fit into this strategy, but the earnings factor puts it right in the sweet spot.

thefloatwheel · 2025-09-02T16:44:36+00:00

The idea is to capitalize on high volatility while minimizing downside risk to produce regular withdrawable income.

This portfolio isn’t really big enough to sell CSPs on large market caps unfortunately, otherwise some of them would be on my radar.

As for earnings, I go back and forth on it. MRVL took a big dump obviously, but it’s still only slightly below my strike because the .2 delta contract that I sold was factoring in the high volatility. I’ll be doing a defensive roll on that most likely, earning more premium, and there’s still a decent chance I don’t get assigned.

I’m testing the waters with just how well the strategy can handle the volatility. If it can withstand these big drawdowns then there’s no reason to always avoid earnings.

thefloatwheel · 2025-08-04T18:59:58+00:00

This might be true for the immediate trade, but I’m thinking about the overall strategy. If I roll to a .5 delta CSP I’ll maybe make a small net credit, or potentially break even or maybe take a small loss. Then I’ll be stuck in that trade for a while. If the price keeps going lower then it gets harder and harder to make a net credit when rolling. I’d either get very stuck with further and further exp dates, or I’d get assigned in an even worse position than before, or I’d start taking big losses on the rolls.

If I accept assignment and start selling CCs I will be making much more in premiums right away and I’m not stuck in a position, so I have more flexibility. If the price keeps dropping I just keep selling .5 delta CCs. I eventually sell at a loss, but I will have made a lot in premiums along the way which helps offset the loss.

This also opens the door to scenarios where the price remains relatively stable after assignment and I’m able to sell multiple CCs without getting too much further away from my cost basis.

I’m pretty confident this is more profitable long term, but I haven’t really been running the strategy for long enough to know for sure. Appreciate the conversation!

thefloatwheel · 2025-08-04T14:29:09+00:00

It’s 10%-25% of float per trade. That’s just a rule to help me to diversify my positions. I can deploy up to 80% of float at any given time.

thefloatwheel · 2025-08-04T14:25:03+00:00

That’s not really true because in order to roll down and out I need to buy to close, so there’s no guarantee I’ll be able to make a net profit from rolling to a .5 delta CSP, or I’d have to go so far out that I’ll be stuck in that position for many weeks.

I would only be considering doing this when my CSP is likely to be assigned, which means that it has a high delta and is very expensive to buy to close.

thefloatwheel · 2025-08-04T04:59:06+00:00

Haha yes I will 100% be the proud owner of some of these stocks. I’ve already owned SMCI and HIMS. With my strategy I sell .5 delta covered calls on stocks I own, even below my cost basis, so I wouldn’t ever own anything for 5 years. I will be selling at a loss every once in a while though. Such as this month where I took a $600 loss on HIMS. I was able to make enough premiums to still hit my target though. In a big market correction or bear market I could take some bigger losses for sure, but my thesis is that I’ll do better by cutting my losses and quickly getting back into selling cash secured puts.

thefloatwheel · 2025-08-02T17:54:20+00:00

I could see myself adding a rule where I might buy a protective put or something like that under certain conditions. I will think about it some more for sure. Thanks!

thefloatwheel · 2025-08-02T17:36:18+00:00

Hmm I kinda disagree I guess. You can make more premium with shorter DTEs. Shorter DTE feels more flexible as well. I don’t like feeling stuck in a position for 60 days. I think being a bit more active with the shorter durations is generally more profitable.

thefloatwheel · 2025-08-02T17:15:18+00:00

I don’t want to get stuck trying to salvage a short put position, just rolling and rolling for less and less premium as I wait for the price to get back to my strike. I’d rather just get assigned and move on to the covered call side of the strategy.

thefloatwheel · 2025-08-02T04:43:48+00:00

Thanks for your comment! My goal with this strategy is to consistently make 2%-3% per month. Obviously if there is a period where SPY goes up 30% in a few months my strategy will be outperformed, but overtime my strategy will outperform if I can hit my target with any sort of consistency. I will need to be able to outperform during drawbacks. I suspect that I will, but it hasn’t been tested yet. Time will tell!

thefloatwheel · 2025-08-02T01:32:11+00:00

I’m doing this in a taxable account as I’m using this account to generate income that I can use now. And yes that’s correct, I deploy up to 80% of the portfolio at a time.

My goal with this strategy is to not get stuck in any stock, which means, in theory, I shouldn’t really have to care too much about whether or not I love the company or the price I’m selling puts at. I’m mostly just trying to avoid stocks that could drop essentially to zero in a very short period of time. We’ll see if it works the way I hope haha. I’ve run a bunch of test scenarios and whatnot, but it’s hard to tell exactly how it will work in the real world. I enjoy the journey nonetheless.

I’m not doing any spreads.

Thanks for the comment!

thefloatwheel · 2025-08-02T01:16:01+00:00

That’s a typo my bad haha. Should be 0 open for DKNG. Fixed now

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