What is a Wheel Strategy in stock trading?

The Wheel strategy is an options trading strategy that involves selling cash-secured puts and covered calls on a stock with the goal of generating income and potentially acquiring shares of the stock at a discounted price. The strategy is also known as the Triple Income Strategy or the Sell-Put-Sell-Call strategy. Does The Wheel Strategy Work?

Can you run a Wheel Strategy on penny stocks?

In order to successfully execute the wheel strategy, you have to be able to trade stocks that are liquid and have an active options market. While some prefer the lower risk of penny stocks, you will likely not be able to run the wheel strategy on penny stocks because they may not have active options.

Is the Wheel Strategy bullish?

The wheel strategy is bullish, but slightly less bullish than owning a stock directly. With stock ownership, the investor has unlimited upside. With the wheel strategy, the potential gains are limited to the premiums received and any dividends paid by the company.

Is the Wheel Strategy safe?

The wheel strategy is safe in that it is similar to owning stock. There are risks with owning stocks and therefore there are also risks with the wheel trade. Investors need be smart with position sizing and stock selection in order to improve the level of safety.