Capital allocation
I establish how much capital is available for trading, how much should remain in reserve and how much exposure to take on any individual company.
Explore capital allocation →The Options Wheel is an established options strategy. I've brought together a structured way to research stocks, allocate capital, collect premiums and manage positions throughout the process.
The OptionsWheeler Method is my practical framework for approaching the Wheel consistently. It focuses on the decisions made before opening a trade and the management decisions that follow.
My aim is to make informed decisions, understand the risks involved and avoid treating premium collection as an end in itself. Not every stock is suitable, not every premium is worth collecting and not every position needs to be opened.
I research the underlying company before considering the options available on its shares.
I decide how much capital to deploy, how much to reserve and how much exposure to accept on any individual company.
I monitor positions, understand the choices available and know when to accept an outcome.
My structured approach takes me from selecting a stock through to managing the complete Wheel cycle.
I establish how much capital is available for trading, how much should remain in reserve and how much exposure to take on any individual company.
Explore capital allocation →I look beyond the option premium. I assess the company's financial position, cash flow, valuation, share-price behaviour and option-market liquidity.
Explore stock research →I consider suitable strikes, expiry dates, premiums, implied volatility and the effective purchase price I'd be comfortable accepting.
Explore cash-secured puts →I monitor the position as the market moves. I consider taking profits, closing, holding or rolling based on the remaining risk and available alternatives.
Explore rolling options →I understand what happens when a put is assigned. I'm prepared to own the shares and reassess the investment rather than treating assignment as automatically positive or negative.
Read about assignment →If I'm assigned shares, covered calls may be used to collect further premium. I consider strike selection, cost basis and the possibility of shares being called away.
Explore covered calls →I review total exposure, concentration, earnings dates and changing company fundamentals. I'm willing to pause rather than force another trade.
Review risk management →One principle of my approach is not to commit all available capital to open positions. Keeping cash in reserve can provide flexibility if several positions are assigned or market conditions change.
For illustration, a $20,000 account might use a 60/40 framework: up to $12,000 allocated to active trading and $8,000 retained as reserve capital.
This is an example of my personal framework, not a universal allocation rule or a guarantee against losses.
Rolling can be one way to manage a threatened position, but I see it as a considered decision rather than an automatic response to a falling share price.
I consider the current option value, time remaining, share-price movement and whether the original investment case still holds.
One approach I consider is moving the expiry further out, sometimes by one or two weeks, where a suitable net credit is available.
Rolling out and down may be worth assessing if the resulting trade offers an acceptable credit and risk profile.
If an appropriate roll isn't available, assignment may be preferable to repeatedly extending a position. I'd only accept it if owning the shares remains acceptable.
Whether you're new to options or developing your existing approach, start with the fundamentals and work through the process at your own pace.
Read the Beginner's GuideI've put together dedicated guides and practical tools to help explain each part of the method.
Researching companies and assessing whether their shares are suitable for the Wheel.
Read the guide →Understand put contracts, strike selection, collateral and premium.
Read the guide →Learn how covered calls work after shares have been acquired.
Read the guide →Explore rolling decisions, credits, expiry changes and assignment.
Read the guide →Think about position sizing, cash reserves and portfolio exposure.
Read the guide →Work through collateral, premiums, effective prices and potential returns.
Open the calculator →Risk notice: Options trading involves substantial risk and is not suitable for every investor. Cash-secured puts and covered calls can result in losses, including significant losses from owning shares that decline in value. Rolling does not eliminate losses or guarantee a profitable outcome. Premiums are not guaranteed income. The educational material on this website is general information only and is not personalised investment advice or a recommendation to buy or sell any security or options contract.