THE PROCESS Have To Be Willing To Own 200 Shares of The Stock Sell 1 Put. If the put expires worthless, revert to step 1 and sell another put. Once assigned on the short put, you hold 100 shares. If you are still bullish on the stock, write another put. At the same time you sell a covered call on the 100 shares. If the stock falls, the 2nd put is assigned, completing the investors’ total order of 200 shares.
BENEFITS OF THE WHEEL Put and call selling helps generate significant monthly income Shares can be purchased for less than their current price Option premium effectively reduces the average cost of the share purchase Dividends received from holding the shares will produce another source of income By adhering to a strict process, you can take some of the emotion out of your investment decision making
Can help generate monthly income and gain exposure to a stock while reducing average cost. Can produce a gain, even when the underlying falls. There are risks involved and you need to stick to your trading rules. CONCLUSION