Traders are always looking for the most profitable trading strategy. Thankfully, there are several profitable options trading strategies that you can try.
Here at BestStockStrategy, I teach my students how to sell option premium so that they can target a ~2-3% monthly return in their account.
While David Jaffee usually does recommend owning stocks (although there definitely are times to buy and own stocks and indices - especially if using portfolio margin), he recognizes that some traders prefer to buy and sell stocks.
The option wheel strategy combines selling options and owning securities in an attempt to maximize profit. Keep reading to learn more about the wheel strategy and how to become successful at trading options.
How Do You Use a Wheel Strategy?
The wheel strategy uses a combination of trades to collect premium and participate in the bullish drift of a security.
Three trades are involved in the wheel strategy:
- Sell an out of the money put
- Get assigned the shares
- Sell a covered call on those shares
To implement the options wheel strategy, start by selling out of the money puts.
With a put option, the owner of the option has the right, but not the obligation, to force the seller to purchase the underlying security at the strike price on or before the expiration date.
When you sell a put option, you collect the premium, which you keep regardless of the outcome of your trade.
Next, if the option expires in the money, the option seller will get assigned and purchase the shares of the underlying securities at the strike price.
For each put that you sold, you will buy 100 shares of the stock.
Finally, you can sell out of the money calls against the shares you own.
By selling a covered call, you can collect additional premium (and keep that premium regardless of the outcome of your trade).
By implementing the option wheel strategy, you can effectively "wheel stock" by participating in the upside potential of the stock while purchasing the stock at a discount and also reducing risk.
Is the Wheel Strategy Profitable?
There are multiple possible outcomes when it comes to the wheel strategy.
In general, the wheel works during bull markets.
While the wheel strategy can be profitable, it's my belief that it dramatically underperforms simply holding SPY. The reason is for the underperformance is that traders are trading upside potential for pennies by selling covered calls while continuing to hold onto substantial downside risk.
While it's true that the premium collected by selling covered calls slightly reduces the cost basis of the security, during a market crash the premium collected will only slightly reduce trading losses during a market crash.
Then, if traders continue to sell covered calls, they run the risk of "locking in losses" if the covered call strike is above the current market price but below their cost basis.
There's a reason why every single covered call ETF dramatically underperforms the stock market - and the reason is that selling covered calls is a bad strategy since it leaves traders holding risk for limited upside.
The ONLY time that I would sell covered calls is:
1) If I felt that the security was significantly overbought
2) The market was crashing and I wanted to collect extra premium
3) I wanted to sell my shares and wanted to sell an ITM call that expires within a few days
is important to recognize the risks associated with selling OTM puts and getting assigned stock.
Otherwise, I believe that traders and investors are MUCH better off simply taking assignment of quality companies and holding onto the shares long-term.
Overall, while the wheel strategy can be profitable (especially in a bull market), but it may not be most effective trading strategy.
Is the Wheel Strategy Risky?
All traders want to earn the highest returns possible on their investments, and many of them consider the wheel strategy as a low-risk method of trading.
By “wheeling a stock,” or using the wheel strategy with a specific stock, you are placing a bet on the future of the company.
If you want a better and safer options trading strategy, consider selling option premium on large capitalization stocks or ETFs and then taking ownership at a discounted price, or buying call spreads and financing them with naked options.
While my views on the wheel have changed, and I no longer recommend it, if you're interested in it, then I highly recommend watching the video below for a detailed perspective on trading the option wheel.
Do You Need a Large Account to Use the Wheel Strategy?
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 liquid options.
To start using the wheel strategy, you should probably have at least $7,500 in your trading account. You do not have to invest your entire account into the wheel strategy.
It is important to keep in mind the risks associated with the wheel strategy and only invest what you can afford to lose.
What Are the Best Cheap Stocks For The Wheel Strategy?
Regarding the best cheap stocks for the wheel strategy and also the best stocks for the wheel strategy, I would highly recommend using high-quality, large capitalization companies with high liquidity. Cheap stocks that can be used for the wheel strategy include: PayPal ("PYPL"), Blackstone ("BX"), Disney ("DIS"), Starbucks ("SBUX"), "SOFI" and JP Morgan ("JPM") - all of these stocks are trading below $250 as of June 18, 2025.
Running the wheel strategy and trading indices or ETFs may be better due to reduced volatility.
Maximize Your Options Trading Profits
Regardless of which options trading strategy you choose, the goal is the same: make a profit while reducing overall portfolio volatility.
I have taught more than 2,500 students a strategy where traders can learn how to win up to 98% of trades by selling option premium (and buying options as well).
If you want to learn the best options trading strategy to minimize risk and maximize profit, David Jaffee is your best option trading coach and resource.
I hope you enjoyed this article about the option wheel and the wheel strategy.
Frequently Asked Questions (FAQs)
How can I run the wheel on options?
1) Sell an OTM put
2) Get assigned
3) Sell covered calls on the shares
Is the wheel strategy a good way to trade?
In my opinion, no it's not. The purpose of owning stock is to participate in the upside. The wheel allows you to own shares at a discount.
However, since it limits your upside potential by selling covered calls, I believe that investors are WAY better off simply taking assignment and holding onto their shares long-term (and NOT selling covered calls).
What strategies are better than the option trading wheel?
There are many strategies that are better.
This is discussed here: The Top 3 Most Successful Options Trading Strategies (Guide)
The strategies include:
1) Buying call spreads financed by selling options
2) Taking assignment of short puts
3) 1 DTE on SPX