Reserved only Wheel Option & Related Strategies

[Yodean]

Interesting approach. Is it really less risk owning leaps instead of shares, with leaps expiring some day while stocks do not?

Yes, that's one of the reasons I'm not a huge fan of selling synthetic covered calls ... you have to make sure you set up your LEAPS really well, in terms of both price and time. In essence, you have more opportunities to make a bad mistake.

WIth owning shares, you "just" have to kind of get your entry average buy price right - there's no theta decay issue. Also, you get the dividends of the stock.

But one of the key advantages of LEAPs is that you tie up much less capital overall, while maintaining the same potential for upside (and downside), as long as you set up your LEAPS properly.

Like a lot of things in investing/trading, there's prolly some out there that can make it work really well.

[SOL]

Generally, I like to strike at 25% to 30% delta in the 4 to 6 week expiration range, but I often modify this, depending on circumstances, for both Spins of the Wheel (SCC vs. SCP).

For example, my base case atm is a volatile but bullish Jan/Feb - so depending on the stock, I may strike at 15% to 20% delta or so, to lessen the potential of the stock being called away.

Also, I tend to strike at higher deltas and aim at slightly lower expiration periods when SCC'ing a stock at which the strike is higher than my cost basis (e.g. taking profits), and especially if I am planning to sell the stock in question .

Do these greeks really work. Many moons ago I tested two portfolios one where i used greeks diligently and the other where I used TA and MP. In the end all the extra effort amounted to nothing. TA and MP triumphed, but that was some time ago, maybe things have changed.

[SOL]

Interesting approach. Is it really less risk owning leaps instead of shares, with leaps expiring some day while stocks do not?

A somewhat better strategy with possibly more upside potential would be to sell puts on a stock you want to own and then use some or all the money to purchase calls. If the shares are not put into your account, you make money via the calls, which you were essentially free as you used the put premium to purchase them. If the shares are put to you, its not a problem, as you wanted to get into this stock anyway. Moreover, you now also own call options.

To move the odds in your favour, its best to sell puts with 9 to 12 months of time premium and then use the proceeds to buy out-of-the-money calls with the same amount of time premium.

[Yodean]

Do these greeks really work. Many moons ago I tested two portfolios one where i used greeks diligently and the other where I used TA and MP. In the end all the extra effort amounted to nothing. TA and MP triumphed, but that was some time ago, maybe things have changed.

I've been Spinning the Wheel full time only since April 26, 2022, so can't say I have anything close to a definitive answer wrt effectively using Greeks. I'm still really an options noob.

As you know, how good deltas are in trading options is very stock specific and dependent on where we are in the general market cycle. I don't use the other greeks too much ...

In a way, the deltas and option premiums for a specific stock reflect sentiment to some extent, imo - maybe even a lot, depending on liquidity.

So, during the bear market last year, in general I would sell covered calls aiming for a more ambitious delta (25% to 33% or so), since most surprises tended to be to the downside.

This year - since my base case is we've transitioned into a neonatal bull - most surprises seem to be more to the upside, so I aim for less ambitious deltas (15% to 21% or so) - to reduce having to roll over the sold calls or getting the shares get called away too frequently.

It's a particularly gr8 environment to sell puts at slightly higher deltas, imo, if I turn out to be correct about the base case.