Options Wheel Strategy Live Trading Session: September 2024

Welcome back my fellow premium pirates! I'm excited to share my latest trades and insights from the options wheel strategy in today's live trading session. If you’ve been following along, you know I like to showcase three solid trades each week, and this time is no different.

Check out the video of the live trading session, or you can read more below:

First, I Need to Write a Covered Call

In the past month, I've had several campaigns open and closed. Last week, I was able to roll all my covered calls on all my open wheel campaigns except for Kraft Heinz Company (KHC). To keep this KHC wheel campaign rolling, I need to identify the best expiration date and write a new covered call to maximize my annualized returns on this campaign.

Analyzing Kraft Heinz (KHC)

My basis on KHC is $38.50 ($3850 open risk), and I've used the Wheel Strategy Screener for potential covered call options. Here’s what I found:

• The best available choice is a $38 strike for November 1st, which is below my basis. While I generally avoid writing calls below my basis, my position has been open for 147 days. I’m already at a $135 profit without including the upcoming premium from the new covered call.
• With the current trading price at $34.68, I’m eager to exit this position and free up my capital for new opportunities.

Using the Fear and Greed Index

Before making new trades, I also check the CNN Fear and Greed Index. Following Warren Buffett's advice,

“Be fearful when others are greedy and greedy when others are fearful”

I gauge my risk tolerance based on this metric. The index currently suggests a more cautious approach because we’re in the “Greed” section of the Index.

Scanning for Good Wheel Stocks

Now, let’s explore potential new campaigns using our option scanner. Here are the criteria I set:

• Expiration: Up to January of next year
• Type: Cash-secured puts only
• Return: Above 2%
• Market Cap: Only large-cap companies
• Delta: Maximum of 0.3 for a more conservative strategy

Potential Opportunities

Snapchat (SNAP):

• Strike Price: $9.50 - 10/18 Expiration
• Discount to Fair Value: 32%
• Technical Analysis: The $9.50 strike price aligns with previous support levels from August and September. This position offers a solid opportunity, as historical data shows that breaking through a resistance level can establish a new support level, making this a favorable entry point.
• Anticipated Return: 2.5% actual return, 43% annualized

Warner Bros. Discovery (WBD):

• Strike Price: $7.50 - 10/18 Expiration
• Discount to Fair Value: 56%
• Valuation Insights: With a fair value estimated at $14, WBD is undervalued, offering an attractive opportunity. My analysis indicates that this position meets my criteria for both risk and return. Since my open risk remains below 5% of my portfolio, I’m comfortable adding this to my watchlist.
• Anticipated Return: 2.4% actual return, 30% annualized

JD.com (JD):

• Strike Price: $28.50 - 11/1 Expiration
• Strike price offers a 44% discount to fair value
• Risk Consideration: While JD is a foreign company, I have successfully executed wheel campaigns on it before. The key metrics align with my trading strategy, but I will be cautious and not allocate more than 5% of my portfolio to this position.
• Anticipated Return: 2.4% actual return, 31% annualized

Campaign results from the Last Video

In my last video, I showed three new wheel campaigns I opened, all with cash-secured puts. I did not get assigned on any of the cash-secured puts I opened in that video, so all of these campaigns are closed. Here are the results:

DocuSign (DOCU):

• Opened for ten days
• Premium Received: $117
• Buyback Price: $37
• Return: 2%
• Risk: $5,000
• Actual Return on Risk: $80 (1.6% return)

Zoom (ZM):

• Held through earnings for two days
• Premium Received: $124
• Buyback Price: $12
• Return: 2%
• Risk: $5,000
• Actual Return on Risk: $124 (2.48% return)

Roblox (RBLX):

• Opened for five days
• Premium Received: $80
• Buyback Price: Market price (error), meant to enter a limit price
• Return: 1%
• Risk: $5,000
• Actual Return on Risk: $50 (1% return)

Summary of Actual Returns on Open Risk

For the three trades I closed, the actual returns based on my open risk were as follows:

• Total Open for All Campaigns: $15,000
• Total Actual Returns:
• DocuSign: $80
• Zoom: $124
• Roblox: $50
• Total Actual Return: $254
• Overall Return on Open Risk: 1.69%

1.69% return on campaigns that were open for a total of 10 days is excellent! The options wheel strategy is not a get rich quick trading scheme or AI trading robot, it’s a method and process that when followed properly can help you earn consistent and steady income while keeping your risk well diversified. If you can get between 1-2% return every ten days throughout the course of an entire year, you can build a significant income stream.

Conclusion

Time will tell how my new trades perform, but I’m optimistic about these campaigns. Be sure to check back for updates in future videos and blog posts.

Don’t forget to visit PremiumPirates.com for a 14-day free trial of our tools. Explore the option scanner, create a watchlist, and see how our platform can help you become a better options wheel trader!

Now get out there and do some premium plunderin’ and market raidin’!