The Wheel Strategy: What To Do When You're Assigned?

The Wheel Strategy: What To Do When You're Assigned? - Coffee With Markus | Episode 105

Intro: 0:00
What's Happening In The Markets: 1:15
What To Do When You're Assigned: 6:55
Deep Dive Q&A: 23:17
Q: If we are fully involved how do we get out, take a loss, and close the position? 25:48
Q: If assigned do you still keep the premium received on selling a put? 26:35
Q: on The Wheel do you have any stop-loss after getting assigned? 27:31
Q: You started selling Puts instead of Calls because Call premiums were too low at that point? 32:41
Q: On TQQQ, you are bringing the cost basis down by selling Calls. Is it similar to buy and hold, and doing average down for the regular stock? 40:43
Q: WYNN may be assigned. If so do we hold the stock through earnings next week? 42:31
Q: What do you do if you're in the buy-write phase of the wheel and earnings come along? Do you close the position and accept an unrealized loss on the shares or manage it in another way? 44:02

Stocks plummeted today! The Dow looked early in the day like it was going to take out its previous low from September 24th.

So what’s going on?

Well, it’s a bad case of Deja Vu. COVID cases are spiking yet again, and no matter the reason this is what traders are looking at.

Also on trader’s mind is:

- The Presidential Election
- The Stimulus Package
- The Vaccine

With all of these things, the ‘fear index’, the VIX has been spiking. So in times of massive uncertainty like this, it’s not a bad time to trade light (like I am) or just sit on your hands (i.e. do nothing).

So with the markets getting banged up, it brings me to our main focus for today: What To Do When You’re Assigned And The Market Crashes?

Let’s take a look at a recent trade in TQQQ where I was assigned. First, on September 3rd, 2020 I sold the 150 PUT for $0.66. One day later, TQQQ tanked and I was assigned shares. I made $66 as the PUT seller (or writer), making my cost basis: $150-$0.66= $149.34

After I was assigned, I sold the 150 CALL for $2.10 and bought it back for $0.37 = $173. Now, this once again brings my cost basis down to$147.61

Next I sold another 150 CALL for $0.45 and bought it back for $0.05, once again lowering our cost bases down to $147.21

The next thing I did was sell two of the 100 PUTS, for $1.14 that I bought back for $0.05 bringing my cost basis down to $146.13

After I sold those two PUTS, I sold another 100 PUT for $2.40 and bought it back for $0.24, bringing our cost basis down yet again to $143.97

Now I sold the 150 CALL for $1.57 and bought it back for $0.15, taking my new cost basis to: $142.55

If you can believe it, I wasn’t actually done selling premium there but I don’t want to bore you. So as of now, I have realized $1,748 which currently makes me cost basis $132.52.

As soon as TQQQ returns to $132.52, my shares are now at breakeven. But if TQQQ keeps moving lower, I will just continue to sell premium, continuing to lower the cost basis. So yes, if I were to close my TQQQ shares today, it would be the WORST day to do this on a day like today (which saw indices down more than 3%).

As you can see, being assigned is just part of trading “The Wheel.” So even if the markets get banged up, you can sell premium against your position to lower your cost basis.

I hope this helps!

#whattodowhenyouareassigned #assignedshares #assignedtradingthewheel
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Видео The Wheel Strategy: What To Do When You're Assigned? канала Markus Heitkoetter