Hey guys I'm relatively new to this strategy but have been using it the last month or so on a couple stocks. Wanted to being some attention though and have done discussion for those using this strategy as well.

Apha- seems like the merger goes through around apha- $20 based on tlry price action. So I've been selling puts under 20 to pick up shares then selling calls around 20.

Auph- been purchasing more shares here with puts. Will start to sell calls although premiums here are tiny compared to apha.

Anyone else out there got any good stocks to run the wheel on?

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Posted by cgrand

HAMMOND

Member since Oct 2009

38971 posts

Posted on 3/14/21 at 1:31 pm to oklahogjr

quote:
Apha- seems like the merger goes through around apha- $20 based on tlry price action. So I've been selling puts under 20 to pick up shares then selling calls around 20.

could you give us an example trade and closing strategy here?

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Posted by Jag_Warrior

Virginia

Member since May 2015

4135 posts

Posted on 3/15/21 at 8:53 am to oklahogjr

It’s a strategy that I’ve used for several years. And it can be very profitable. But I tend to avoid special situations (other than earnings announcements), as their price movements are rather unpredictable. I generally use the deltas to decide my strikes, and when unexpected news could hit at any time, that screws up the predictable range.

With this strategy I use the deltas, as well as some basic charting to see where I’d be content to own the stock if the naked put does go ITM. And then I set a profit target for the short call strike (irrespective of delta) as my desired exit point.

I used the strategy on PLUG and got shares at 16 way back when. I made a good return when it got called away at 18. But look at it now.

So you have to be prepared for a stock to run after it gets called away, and also for a stock to collapse (FSLY) once it gets put to you. Just have to remember that you’re playing a long game with this particular trading (NOT an investment) strategy.