Wheel Strategy RISKS | MUST WATCH Before Using Wheel Strategy Options

In this video, we are going to discuss the wheel strategy risks that you must know about before using the wheel strategy for passive income.

► There are three main risks to consider before starting to use the wheel strategy for income. The wheel strategy risks are 1) having a losing trade 2) missing out on a big move and 3) incurring a higher tax rate.

► Before getting into the risks of the wheel trade, I first explain how to use the wheel strategy. Starting with selling a cash secured put, next buying stock, then selling a covered call, and finally selling stock. Then I provide an overview of three main risks of the wheel strategy.

► Having a losing trade: the wheel strategy is not a guarantee, you can definitely lose money when using the wheel strategy with options. The best example of this would be when you sell a cash secured put option to start the wheel trade and then see the stock price crash substantially. You will then be forced to buy the stock at the strike price of the out option and potentially be looking at a decent sized loss on paper. From here there are a few options that you can decide between to cut your losses or potentially mitigate the losses and try to turn things around - I discuss these options in the video.

► Missing out on a big move: once you sell a covered call in the wheel strategy, you cap your upside. If the stock price moves substantially higher, you will not be able to realize the full upside because you will have to sell your stock at the strike price of the call option that you sold.

► Incurring a higher tax rate: when using the wheel strategy, one very real risk is creating short term capital gains that are taxed at a substantially higher rate than short term capital gains. Depending on your tax bracket, the difference in short term capital gains vs. long term capital gains can be 10-25%. Please consult a CPA and do your own research on this topic.

► If you are looking for a detailed description on how to use the wheel strategy with options check out this video where I go in depth on the wheel strategy trading approach: https://youtu.be/5mMlm6Qq04Q

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🕘Timestamps🕘
0:00 Intro
0:49 Overview of the Wheel Strategy
2:22 Example of a good wheel trade
6:21 Risk #1: Losing wheel trade
11:39 Risk #2: Missing a big move on the stock
14:11 Risk #3: Tax rate differences

► If you’re looking for a broker to make your wheel strategy trades, you can use the links below to get started trading the wheel strategy on Robinhood or Webull - they both offer free trades and you will also get a free stock when you sign up and fund your account.

💰 Get FREE STOCK on Robinhood: https://join.robinhood.com/masonp2
💰 Get 2 FREE STOCKS on Webull: https://act.webull.com/t/8bBWMfEzZIsK/1i5/

❓ If you have any questions, ask in the comments below, I read and respond to all comments.

Disclaimer: This video and description may contains affiliate links to products or services that I use. If you choose to use these links, I may earn affiliate commissions at no additional cost to you. This video is not investment advice and is purely for entertainment purposes only. Before you make any investments, please do your own research. All of the opinions in this video are my own.

Видео Wheel Strategy RISKS | MUST WATCH Before Using Wheel Strategy Options канала Money with Mason - Personal Finance and Investing