What is a Wheel Strategy in stock trading?

The Wheel strategy is an options trading strategy that involves selling cash-secured puts and covered calls on a stock with the goal of generating income and potentially acquiring shares of the stock at a discounted price. The strategy is also known as the Triple Income Strategy or the Sell-Put-Sell-Call strategy. Does The Wheel Strategy Work?

Can you run a Wheel Strategy on penny stocks?

In order to successfully execute the wheel strategy, you have to be able to trade stocks that are liquid and have an active options market. While some prefer the lower risk of penny stocks, you will likely not be able to run the wheel strategy on penny stocks because they may not have active options.

How many trades are involved in the options Wheel Strategy?

Three trades are involved in the wheel strategy. To implement the options wheel strategy, start by selling out of the money puts. With a put option, the owner of the option has the right, but not the obligation, to own the underlying security at the strike price on or before the expiration date.

How to generate options Premium using the Wheel Strategy?

Remember, there are only three steps you need to know to start generating options premium using the Wheel Strategy: First, we sell put options to collect premiums. Then, we wait to see if we get assigned or not. Finally, if we do get assigned we sell call options, but if we don’t, then we go back to Step 1 again.