{"id":46220,"date":"2023-05-27T08:00:00","date_gmt":"2023-05-27T06:00:00","guid":{"rendered":"https:\/\/staging.captrader.com\/blog\/wheel-strategie\/"},"modified":"2024-11-29T10:24:19","modified_gmt":"2024-11-29T09:24:19","slug":"wheel-strategy","status":"publish","type":"blog","link":"https:\/\/www.captrader.com\/en\/blog\/wheel-strategie\/","title":{"rendered":"Wheel strategy - additional return for your portfolio!"},"content":{"rendered":"

The wheel strategy is a popular option strategy that aims to achieve a profit with the combination of Cash Secured Puts<\/a> and Covered calls<\/a> achieve an additional return on your existing share portfolio. You can find out exactly how this works in this blog post by guest author Alexander Eichhorn.<\/p>\n\n\n\n

Wheel strategy procedure<\/h2>\n\n\n\n

The wheel strategy consists of two option strategies Cash Secured Put<\/a> and Covered Call<\/a>. The wheel strategy is structured as follows:<\/p>\n\n\n\n

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  1. Optimal stock selection: The first step is stock selection. The main prerequisite for the wheel strategy is the desire to buy a share at a certain price. As an option usually relates to 100 shares, there should be sufficient cash in the account.
    Example: A 50 put option is an investment of USD 5,000 (100 shares * 50 strike price). In addition, the stock selection should not be too speculative, as insolvency of the company will lead to large losses despite the use of the wheel strategy. In principle, the strategy works with all optionable underlyings, including     ETFs<\/a>.

    Important: Only select stocks for the wheel strategy that are also suitable for your long-term portfolio!<\/li>\n<\/ol>\n\n\n\n
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    1. Trading a cash-secured put: The aim of a cash-secured put is to acquire shares at a more favorable entry price by selling an out-of-the-money put option. The writer receives an option premium for this put option, so that he is remunerated for the waiting period for the more favorable entry price. If the put option expires worthless at the end of the term, the process can be repeated and a new put option can be sold. However, if the option is in the money at the end of the term, 100 shares are booked. Step 3 now follows with the wheel strategy.<\/li>\n<\/ol>\n\n\n\n

      Tip: There are a few things to bear in mind with cash-secured puts from a tax perspective! Tax consultant Frank Konewka has published an article on this in the blog on Trading-Steuerberatung.de: to the blog post<\/a><\/p>\n\n\n\n

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      1. Trading a covered call: The investor now holds 100 shares in the securities account and would like to option them further. He therefore sells a short call on the existing shares. This short call is hedged by the shareholding of 100 shares and is referred to as a \"covered call\". If the call is out of the money at expiry and the option expires worthless, the investor can issue a new covered call and collect premiums again. However, if the option expires in the money, the shares are derecognized at the strike price and step 4 follows. However, the investor may still keep the call premium.<\/li>\n<\/ol>\n\n\n\n
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        1. Repetition of the \"wheel\": The investor no longer holds any shares as they have been booked out through a covered call. He has gone through the \"wheel\" once and can start again at step 1 and select new shares for the wheel strategy.<\/li>\n<\/ol>\n\n\n\n
          \"A<\/a>\"A<\/a>\n<\/div><\/div>\n\n\n\n
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          Wheel strategy<\/figcaption><\/figure>\n\n\n\n

          Wheel strategy with index ETFs<\/h2>\n\n\n\n

          In recent years, the product segment of ETFs<\/a> experienced very strong growth. In the course of this success, the US stock exchanges have also offered ETF options for some ETFs in order to further strengthen the trading opportunities for ETFs. As a rule, an ETF option (like a share) has a contract value of 100 shares, i.e. 1 ETF option relates to 100 ETF shares. Trading the wheel strategy is therefore also possible with ETFs!<\/p>\n\n\n\n

          Below we list the most popular index ETFs that are also liquidly tradable with options:<\/p>\n\n\n\n