Wealth Building With Options

Dan is joined by returning guest John Kmiecik to unpack the real-world consequences of trading illiquid options (wide bid/ask spreads, low volume/open interest and “roach motel” trades you can’t exit efficiently). They also discuss how expanding strike/expiration listings can fragment liquidity, even in big names, and when a “one-sided” wheel trade can justify holding through expiration. Key Topics What liquidity is and why it’s central to wheel trading execution The “roach motel” problem: easy to enter, painful to exit First-pass liquidity checks: bid/ask spread as the quickest warning sign Supporting clues: volume and open interest (and why they usually align with spreads) The risk of trading unknown tickers with wide spreads Position sizing vs. liquidity: why 1,000-share covered calls can be hard to unwind in thin names Liquidity fragmentation from more strikes/expirations (including M/W/F listings) Surprising pockets of illiquidity even in large underlyings depending on expiration Earnings timing and why certain expirations may be missing or avoided When illiquid wheel trades can still work: entering with a plan to hold to expiration Key Takeaways Bid/ask spread is the “tell.” If it’s wide, you don’t need more proof; execution costs are already embedded in that market. Illiquidity turns profits into mirages. You can be “right” on paper and still struggle to exit near breakeven because the spread eats the edge. Volume/open interest matter, but spreads matter more. Low OI/volume often explains wide markets; the spread is the final summary metric. Size must match the option market. The bigger your position (e.g., 10-lot calls), the more liquidity becomes non-negotiable. More expirations can mean worse trading. Adding strikes and expirations can dilute order flow, widening markets even in otherwise liquid names. Not all expirations are created equal. Liquidity can vary dramatically across adjacent expirations; always check the specific chain you plan to trade. One-sided wheel trades offer an escape hatch. If you can enter at a price that meets your plan and intend to hold to expiration, liquidity on the exit may be irrelevant. Your trading plan decides the tolerance. If rolling/active management is required, illiquidity is a bigger threat; if “hold to expiry” is acceptable, you have more flexibility. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0 Car Screech car screech.wav by SGAK -- https://freesound.org/s/467794/ -- License: Creative Commons 0

Dan explains why execution price is the one place retail traders truly “compete” with market makers and how improving it can dramatically reduce slippage, the biggest hidden cost in options trading. You’ll learn how market makers manage risk (delta-neutral hedging) and why they demand compensation through the bid/ask spread, plus practical tactics for middling markets, using resting orders and handling illiquid options without getting trapped by wide spreads. Key Topics Why execution price (not trade direction) is where you compete with market makers How market makers hedge: delta-neutral positioning and remaining Greek risks  Theoretical value vs. bid/ask and how slippage is “paying for liquidity” Practical middling: balancing a better price vs. the probability of getting filled Wide markets: what they signal about perceived risk and liquidity-provider behavior “Unknown counterparties” and why order flow behavior varies by underlying Behavioral traps: primacy effect and price anchoring when markets move Using resting (GTC) limit orders to target required yield (skate yield / dividend yield) “Wish list” orders: when they work and how they can tie up cash Managing very illiquid options: when the best exit tactic is the “do nothing” plan Key Takeaways Slippage dwarfs commissions. Selling the bid and buying the offer repeatedly can quietly erase edge. Market makers must be paid for risk. They hedge delta quickly, but still carry gamma/theta/vega exposure, so spreads exist for a reason. Middling is a skill, not a rule. The optimal limit price depends on liquidity, tick size (pennies vs. nickels) and how that option class trades. Start in the “middle range.” When uncertain, work an order roughly between the bid and theoretical value rather than immediately hitting the bid. Don’t let anchoring sabotage good trades. If the math still works at a new market price, the opportunity may still be valid. Resting orders align price with your plan. If you need a specific yield, let the market come to you instead of forcing a trade. Illiquidity changes the exit calculus. Sometimes closing early is an overpaying problem and a theta/opportunity-cost problem. Letting options expire can eliminate exit slippage. You accept gap risk, however, especially when assignment forces you to wait until Monday. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan breaks down the real costs of trading and why commissions, while worth managing, are rarely the biggest threat to your returns. The true hidden expense is slippage, driven largely by liquidity. He walks through how to evaluate option liquidity using bid-ask spreads, size, volume and open interest, and sets the stage for mastering the critical execution skill of middling the market. Key Topics Trading as a business with controllable operating expenses Why commissions are smaller than most traders think and how to negotiate them Slippage as the largest hidden cost in options trading The 10% Rule for evaluating bid-ask spreads Why liquidity should be assessed across multiple strikes and near-term expirations Using market size (contracts bid/asked) to gauge execution quality Understanding volume vs. open interest and what each reveals Why not all high-volume options are equally liquid The concept of theoretical value between bid and ask Introduction to middling the market to reduce slippage Key Takeaways Commissions are rarely the real problem. Slippage from poor execution can quietly cost far more. Tight markets matter. Consistent narrow bid-ask spreads across the option chain improve long-term results. Liquidity is multi-dimensional. Spread width, size, volume and open interest all contribute to execution quality. Market makers price around theoretical value. Trading too close to the bid or ask gives up edge. Execution skill compounds. Learning to work orders closer to the midpoint can materially improve performance over time. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan explains how wheel-style covered calls can turn “meh” or even speculative stocks into strategic, risk-managed income plays through cumulative premium and even share-loan income. He also explores the often-overlooked reality that trading is a business with costs, especially taxes, commissions/fees and slippage. He shares two real trade stories to show how premium collection can create downside cushion and discusses practical tax considerations. Key Topics Turning “average” stocks into strong outcomes via options overlay Cumulative discount/hedge effect: premium as downside cushion over multiple call cycles Measuring returns: percent of cost basis, annualized return and if-called return framing Speculative wheel setups: when guidelines can be overridden by math Two-pronged income: covered call premium + stock loan interest in heavily shorted names The “lemonade stand” lesson: every business has input costs, trading included Core cost buckets: taxes, commissions/fees, slippage (and why they matter more than people think) Tax positioning: tax-deferred/tax-free accounts (e.g., IRA) for wheel cycles “Trader tax status”/treating trading as a business: what to ask your accountant 1256 contracts and index options: potential tax advantages and why they can clash with wheel mechanics Margin mechanics: why SPX vs. SPY mismatches can become naked exposure under Reg-T Portfolio margin considerations, eligibility requirements and broker-specific rules (and limits in IRAs) Key Takeaways Wheel returns are often about the premium, not the stock. A stock doesn’t need to be a “home run” if the options structure creates a favorable payoff. Cumulative premium reduces speculation. Each additional premium cycle increases downside cushion and improves the risk profile versus the initial entry. High-IV, high-short-interest setups can offer “double dip” income (option premium + share lending), but they are inherently higher risk and require intentional sizing and expectations. Treat trading like a business. Costs are real, especially taxes and execution friction, and ignoring them makes otherwise “good” trades look like they “don’t work.” Account selection matters for the wheel. Because the wheel mixes long-term stock holding with short-term option cycles, tax treatment can get messy in taxable accounts. Know the product mechanics before chasing tax benefits. Index options and 1256 treatment can be attractive, but wheel-style coverage can break if the underlying and option product don’t margin as a true covered position. Your next best move is better questions. Bring your accountant/broker targeted questions about account type, deductions/eligibility and margin rules. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan shifts from cash-secured put “double threat” setups to covered calls, especially the skate objective (keeping premium without assignment). He explains why technical analysis is often the most practical way to add edge to covered call strike selection, particularly by using resistance, momentum tools like RSI and realistic range expectations. He also walks through how to sanity-check any setup with annualized yield and what to do if the stock runs through your strike (accept assignment vs. roll proactively). Key Topics Covered calls vs. cash-secured puts: same structure, different investor use cases Planning covered calls by objective: skate (avoid assignment) vs. trade (sell stock) Why technical analysis is especially useful for covered call skate trades Resistance as a “speed bump” that can override pure probability distributions Momentum tools for topping signals: RSI (overbought pullback, divergences) and ADX Range expectations using volatility and why it’s informational, not true edge De-annualizing volatility to estimate a short-term range (standard deviation over DTE) Why “84% probability” strike-setting can be arbitrary and premium congruent Limitations of implied vs. historical volatility for strike selection Range indicators (Bollinger Bands/Keltner Channels): why Dan found them lacking Introducing Dan’s custom tool: PAS (Price History Anchored Strike) indicator Case study walkthrough: aligning resistance + PAS band, then validating with yield Decision tree when strike gets threatened: accept assignment vs. roll up / up-and-out Key Takeaways Resistance can provide edge. It often repels advances more than a purely random (lognormal) model would suggest, making it useful for protecting covered calls. TA beats “probability trivia.” Volatility-based strike placement mostly tells you odds that are already reflected in premium; resistance/RSI can add an extra “bump in the road.” Annualized yield is the filter. Even if the strike is well-placed, the covered call still needs to pay enough to justify the trade. Volatility estimates have limits. Implied volatility is heavily supply/demand-driven, and historical volatility may not match the coming regime. Use both cautiously. Strike selection is never exact. You’ll always round to listed strikes; the goal is stacking confirmations (e.g., resistance + PAS range). Management matters when the stock pushes through. If you want to keep shares, rolling early (often once ITM) is the proactive move; if not, assignment can be a clean exit. Know your outcomes in advance. Skate objective traders should define when they’ll roll; trade objective traders should focus on the if-called transaction return. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan tackles a common complaint he hears from traders: “The wheel doesn’t work.” His take is straightforward: When wheel trades are placed without clear standards for strike selection, premium adequacy and outcome planning, they can absolutely “suck.” He shows how to build better wheel setups by using annualized return metrics (especially skate yield) and by designing trades where either outcome, skating or getting assigned, can be a win.  Key Topics Why many wheel trades fail: missing key nuances in setup and expectations Moving from “what do I do if X happens?” to “what outcome do I get if X happens?” The importance of minimum premium vs. stock price (and why a blanket rule won’t work) Using annualized returns to compare trades across different timeframes Cash-secured puts from first principles: premium as ROI on cash set aside Skate return on cash and skate yield as core wheel decision tools The “double threat” concept: designing puts where both skating and assignment are favorable Selecting put strikes using valuation targets (e.g., PE-based price targets) or support levels Picking expirations by calculating and comparing skate yield across multiple cycles Why far OTM puts often produce poor ROI despite still carrying meaningful risk Using the cumulative discount effect to improve future entry flexibility after repeated skates Key Takeaways Wheel trades don’t fail; bad wheel setups do. Most “the wheel sucks” stories trace back to poor strike/premium decisions and unclear objectives. Annualized yield is the best reality check. It keeps you from accepting premiums that look “fine” in dollars but are weak as an investment return. Skate yield is a power metric for cash-secured puts. Premium ÷ strike (annualized) lets you compare puts to other yield instruments like CDs and bonds. You don’t need trades to be repeatable for annualized returns to be useful. The point is selecting each unique opportunity with an attractive risk-adjusted return. Aim for “double win” setups. The best put trades can be structured so if you skate, you earn a strong yield on reserved capital, and if you get assigned, you buy shares at a price your analysis already says is attractive. Ignore post-trade regret about upside. If you wouldn’t buy the stock at today’s price, it’s not meaningful to lament “money left on the table.” Avoid the far-OTM trap. Low premium can create a poor ROI even if assignment risk feels “less likely.” Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan lays out the core performance metrics that help wheel traders evaluate, compare, and improve covered calls and cash-secured puts. He explains why isolating the option component of returns matters and why annualizing turns “apples to apples.” He also introduces a powerful long-term concept, the cumulative discount effect, where repeated premium collection steadily lowers your effective risk over cycles. Key Topics Why measuring trade performance leads to better decision-making Separating the option “yield” from the stock’s P&L noise Covered call metrics: static return, annualized yield, if-called return Covered call reference points: breakeven/cost basis and indifference point Why time value (extrinsic) is the key input in these formulas Cash-secured put metrics: skate return on cash and annualized skate yield Cash-secured put reference points: breakeven/cost basis and indifference point Comparing cash-secured put yield to other investments (CDs, bonds, etc.) The cumulative discount effect across wheel cycles Why cumulative premium can reduce risk and improve Sharpe Ratio Clarifying “cost basis” vs. tax cost basis Key Takeaways Metrics create clarity. You can’t improve what you don’t measure, especially in a strategy built on small edges. Use time value, not total premium, for true option yield. Extrinsic is what decays and what you’re paid to harvest. Annualize to compare fairly. Annualized yield lets you compare different expirations and even different underlyings. Know your outcome scenarios. Static/skate metrics assume no assignment; if-called metrics assume assignment—both matter. Cumulative discount is the long-game advantage. Over cycles, repeated premiums lower effective entry price, reduce risk and can improve risk-adjusted returns. “Cost basis” here is conceptual, not tax guidance. Treat these as trading metrics—not tax accounting. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan takes a critical but balanced look at backtesting and why it often leads traders astray, especially when it comes to strike and expiration selection for covered calls and cash-secured puts. Drawing on decades of experience and firsthand work with traders and developers, Dan explains why backtesting tools have structural limitations, how those limitations create misleading conclusions, and why discretion, objectives and real-world market structure still matter far more than “optimal” backtested metrics. Key Topics What backtesting is—and what it’s actually good for Why strike and expiration selection matter so much for edge The hidden limitations of backtesting platforms Why support and resistance can’t be meaningfully backtested The subjectivity of fundamental analysis and valuation models Common backtesting strike rules: delta, % moneyness and standard deviation Why no single delta or strike distance can be “best” Rounding errors and incomplete option-chain data Entry/exit limitations caused by expensive market data Unintentional data fitting based on test time horizons How backtesting can create false confidence and bad habits Using objectives (skate vs. trade) to guide real-world strike selection Key Takeaways Backtesting is useful—but incomplete. It can inform strategy behavior, but it cannot capture discretion, context or market structure. Strike “optimization” is often an illusion. Apparent outperformance by a specific delta or distance is usually the result of rounding, data constraints or time-period bias. Markets don’t reward mechanical precision. If one delta were objectively superior, the options pricing model itself would be broken. Support, resistance and fundamentals matter but can’t be coded cleanly. These human-driven factors provide real edge but resist automation. Objectives should drive decisions. Use technical levels for skate trades and fundamentals for trade-objective setups. You’ll never get it perfectly right—and that’s OK. Adjustments and rolling are part of the wheel, not failures. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan ties the wheel strategy to New Year’s resolutions, emphasizing that the wheel only works when it’s traded consistently and in cycles. He explains how to systematize the process so it fits into real life—reducing friction, minimizing time demands and making long-term wealth building sustainable. Key Topics Why the wheel succeeds only as a cyclical strategy Commitment to process over individual trades Fitting the wheel into your daily or weekly schedule Stock selection and trade execution timing Managing expirations, assignments and recycling trades Minimizing adjustments and ongoing maintenance Using planning and automation to save time Systemizing the wheel for long-term results Key Takeaways One-off trades don’t build wealth—cycles do. The power of the wheel comes from repeating the process consistently over time. Systemization is essential. A clear, repeatable routine makes the wheel sustainable and effective. The wheel must fit your life. When the strategy aligns with your schedule, it becomes manageable and even enjoyable. Time requirements are modest. With planning, most wheel maintenance takes minutes—not hours. Consistency beats intensity. A steady, methodical approach delivers better long-run results than sporadic effort. Make it a resolution worth keeping. This is the year to commit to a structured, cyclical investing process. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan puts implied volatility in its proper place: It’s not the single most important factor in wheel trading, but it meaningfully improves outcomes over time. Using a field-goal analogy, Dan explains how volatility analysis adds a “little edge” on each trade that compounds across many cycles. He then goes deeper into when volatility matters most, plus a practical framework for evaluating whether selling puts or calls into earnings creates a favorable “sweet spot.” Key Topics Why implied volatility is not the most important thing—but still important The 1-2-3 volatility analysis for identifying overpriced options Active vs. passive wheel trading and volatility requirements The wheel hierarchy: price movement, theta decay, then volatility Risk premium and why options tend to be overpriced over time “When in doubt, palms out” and the premium-seller mindset Volatility regimes and how prolonged low IV changes decisions When extremely high IV is a warning sign, not an opportunity Why IV matters less for ultra-short DTE options Earnings as a volatility event: when to avoid vs. exploit Using break-even and indifference points to find the earnings “sweet spot” Using puts to enter or calls to exit around earnings Key Takeaways IV is an edge, not the core driver. Underlying price movement and theta are usually more influential in wheel outcomes, but IV adds incremental advantage that compounds over time. Active and passive wheel traders use IV differently. Active traders may require confirmation that options are overpriced; passive traders may prioritize keeping the cycle going and capturing the long-run risk premium. Humility matters in volatility forecasting. You can’t know with certainty whether options are mispriced until after expiration, so rules-based processes help reduce overconfidence. Regime awareness beats day-to-day noise. A few low-IV days are normal; weeks or months of a pattern can justify sitting out or adjusting tactics, especially in strong rebound “freight train” markets. Extremes cut both ways. Slightly high IV can be attractive for selling, but extremely high IV may signal risk you don’t understand. Earnings setups can be evaluated objectively. Compare historical earnings gaps with the option’s break-even/indifference “sweet spot” to judge whether premium meaningfully compensates for the expected move. If selling calls to exit stock into earnings, assignment probability matters. At-the-money or slightly in-the-money calls can improve assignment odds and provide more downside cushion, but the true advantage comes from time premium, not intrinsic value. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan explains why wheel traders must think about technical analysis differently from momentum or breakout traders. Using a Home Depot analogy, Dan shows how the right tool for the job matters—especially when selecting indicators for skate-objective trades. He dives into oscillators (with a focus on RSI) and introduces a new strike-selection concept he’s developing. Key Topics Why trends and momentum are often the enemy of wheel traders Using technical analysis to reduce trades per wheel cycle Choosing the right indicators for skate-objective trades Oscillators and how they differ from breakout indicators Deep dive into the Relative Strength Index (RSI) Overbought and oversold signals for covered calls and cash-secured puts RSI divergences and what they signal for wheel traders Introduction to the PAS (Price-history Anchored Strike) indicator Why wheel traders avoid “trendy” stocks Overview of volatility analysis as part of the options trader’s trifecta Key Takeaways Wheel traders don’t want momentum. Strong trends often force rolls, increase trade count and slow down wheel cycles. Technical analysis should reduce activity, not increase it. The goal is fewer trades per cycle, not more signals. Oscillators are better tools for wheel traders. Indicators like RSI help identify waning momentum rather than breakouts. RSI can improve strike selection. Overbought and oversold reversals—and divergences—can increase the odds of skating successfully. Indicators don’t predict the future. They provide a small statistical edge when used correctly. Volatility matters as much as price. Understanding whether options are overpriced or underpriced is critical for consistent income strategies. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Next Episode Preview: Next time, Dan goes deeper into volatility analysis, expanding on how wheel traders can evaluate implied volatility, historical volatility, and upcoming catalysts to improve covered call and cash-secured put decisions.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan demystifies one of the most misunderstood areas of technical analysis: support and resistance. Rather than treating these levels as “magic lines on a chart,” Dan explains the market mechanics behind them—how real buy and sell orders, supply and demand, and human decision-making actually move prices.  Key Topics Why support and resistance are commonly misunderstood Technical analysis as a map of human behavior (price, not value) The basics of market mechanics: bids, asks and order size How supply and demand move prices tick-by-tick How horizontal support and resistance levels are created Why price levels hold—and the three main reasons they break Moving averages (SMA/EMA) as dynamic support and resistance Why the 200-day moving average matters to institutions “Death cross” and “golden cross” and what they signal Applying support/resistance to wheel strike selection for skate trades Key Takeaways Support and resistance aren’t magic. They reflect real buying and selling pressure created by market participants. Technical analysis explains price behavior, not valuation. It tracks what price and volume did—and how traders reacted. Prices move through order flow. Buyers absorb offers to push price up; sellers take out bids to push price down. Support/resistance can fail for predictable reasons. Levels break when supply/demand overwhelms the other side, participants finish their trades or new information changes valuation inputs. Moving averages can become self-reinforcing levels. Long-term averages like the 200-day influence institutional decisions and can behave like support or resistance. Wheel traders can use these levels to improve skate trades. Support can inform cash-secured put strikes; resistance can inform covered call strikes. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Next Episode Preview: Next time, Dan continues building on technical analysis for wheel traders—going deeper into how to apply support, resistance and key chart-based levels to choose strikes that improve the probability of skating without assignment.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan breaks down the true “secret sauce” of successful wheel trading: pairing the right objective (trade vs. skate) with the right type of analysis (fundamental vs. technical). He demonstrates how to reverse-engineer strike prices using dividend yields and valuation metrics and walks through a real example using Verizon (VZ). Key Topics Defining the skate objective vs. the trade objective Why trade objective trades pair naturally with fundamental analysis Why skate objective trades pair naturally with technical analysis How to reverse-engineer strike prices using target dividend yields How to set strike prices using target P/E ratios Real-world example: Verizon (VZ) dividend and valuation analysis When to wait for better pricing or volatility before selling puts Preview of using support and resistance for skate trades Key Takeaways Every wheel trade needs a single, clear objective. Choose either skate (avoid assignment) or trade (seek assignment) to stay consistent and intentional. Match your analysis to your objective. Use fundamentals for trade-objective entries and technicals for skate-objective premium selling. Reverse-engineer your strike prices. Start with the yield or valuation you want, determine the stock price that achieves it, and choose the strike accordingly. Premium can tweak your effective entry price—but don’t lose the plot. Premium helps refine entry, but fundamentals should guide the trade. Wheel trading can be “almost win–win,” but risk still exists. Assignment locks in value; non-assignment yields premium—but price risk remains. Conservative income plays can complement growth positions. High-yield value names can balance more aggressive holdings. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show. Next Episode Preview: Next time, Dan digs deeper into technical analysis for skate-objective trades, focusing on how horizontal support and resistance can help identify strike prices where the stock is less likely to move—boosting your confidence and consistency when selling premium.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Dan compares buying stocks to buying a dry cleaning business to demystify fundamental investing. Learn how value investors like Warren Buffett evaluate companies, and why understanding P/E ratios, earnings, and dividends can help you select better strike prices for your wheel trades. Key Topics The dry cleaner analogy: why buying stock is just like buying a business P/E ratios: what they reveal when comparing competitors Intrinsic value vs. market price Earnings (EPS): quarterly vs. trailing twelve months Dividend mechanics and dividend yield Using fundamental metrics to set strike prices for wheel trades Why the market isn't as efficient as you think Key Takeaways You actually own the business. When you buy stock, you own a proportional share of that company's revenue—it's literally your money. Dividend investors think backwards. While most people chase rising stocks, dividend investors wait patiently for prices to fall so they can lock in higher yields. Price isn't value. The stock market often disconnects from intrinsic value—that's where opportunities hide. Your fundamentals matter for strike selection. Understanding earnings and dividend yield can help you choose more strategic strike prices for covered calls and cash-secured puts. Connect Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Get exclusive content including video trade walk-throughs, Dan's actual trades, monthly AMA webinars, and more: wealthbuildingpodcast.com Subscribe on your preferred platform and leave a review to help more traders discover the show.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Episode Summary In this conversation, Dan sits down with performance coach and former trader Denise Shull, author of Market Mind Games and the real-life inspiration for Wendy Rhoades on Billions. Denise explains why the old mantra “take the emotion out of trading” is scientifically wrong—and how learning to work with your emotions, instead of against them, can dramatically improve your decision-making. From intuition and regret to boredom, ADHD and market regime changes, this episode redefines what it means to be a “disciplined” trader. In This Episode, You’ll Discover: Why every decision requires emotion How modern neuroscience shows that perception is prediction—and that your brain is constantly asking, “Is this good or bad for me?” before you ever place a trade. Emotions as data—not distractions The difference between “integral” emotions (about the trade and market) and “incidental” emotions (about you, your P&L, identity and history), and why separating the two is a core trading edge. How to use intuition without going “on tilt” Why true intuition is unconscious pattern recognition built from experience (like a chef knowing a steak is done by sight) and when “I feel good about this trade” is useful versus dangerous. A practical method to blend logic and gut feel Denise’s 1–7 conviction/emotion scale, how granular emotional language improves performance and how to consciously factor “how much do I really believe this?” into your trading process. The real role of regret and how slumps start Why trying to “stay positive” can backfire, how unprocessed regret leads to trading slumps and how to use negative emotions to actually improve instead of burying them. Cutting the worst 5% of your trades How recognizing fear of future regret and choosing your “flavor of regret” can help you avoid revenge trades, impulse trades and the handful of decisions that wreck your year. Managing boredom and ADHD tendencies Practical ways traders can keep boredom from morphing into overtrading—by defining time frames, having intentional breaks and non-trading activities, and challenging the myth that you must always be in the market. Adapting to market regime changes How to think about market environments like different “genres of music,” why you don’t need to catch the exact top or bottom and how ego and the need to feel smart can sabotage regime shifts. The one daily practice Denise recommends The simple but powerful question—“What am I feeling and why?”—and how regularly sorting feelings into “about me” vs. “about the market” aligns you with how the human brain actually works. About Our Guest – Denise Shull Denise Shull is a former CBOE floor trader turned performance coach specializing in decision-making under risk and uncertainty. She holds a master’s degree in neuropsychoanalysis from the University of Chicago, traded at firms like Schonfeld, and later ran a day trading desk during the internet boom. Her work shows how emotion and cognition are intertwined in every decision—a theme she explores in her book Market Mind Games, which helped inspire the Wendy Rhoades character on Showtime’s Billions. Today, she coaches hedge fund managers, traders, and elite athletes around the world on how to use emotions and intuition as a competitive edge.   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document   Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Finding quality trade ideas for the Wheel Strategy is essential—but where do you actually get them? In this episode, Dan Passarelli breaks down the best (and worst) sources for finding wheel trade candidates. From trade idea services and investment clubs to news media and DIY analysis, Dan explores the pros and cons of each approach and shares what really works for covered calls and cash-secured puts. Dan also discusses why boring, sideways stocks make the best wheel candidates, why the pundits' favorite stocks are often the trickiest to trade, and teases an upcoming series on fundamental, technical, and volatility analysis for building your own watchlist. What You'll Discover in This Episode: Trade idea services: The difference between "general trades" and wheel-specific investment ideas Why most trade idea services only give entries (not exits) and how to evaluate them Investment clubs: Learning from peers and building synergy through shared knowledge The media trap: Why stocks that "bleed" or soar aren't always ideal for wheel trading Selling options is selling volatility: Why sideways stocks outperform for covered calls and CSPs DIY analysis preview: Dan's upcoming deep-dive episodes on fundamental, technical, and volatility analysis The role of "idea people" in trading and why dreams need execution Resources & Links: Subscribe to the Wealth Building With Options Podcast Learn more about host Dan Passarelli and Market Taker Mentoring: MarketTaker.com Support the Show: Become a paid subscriber at WealthBuildingPodcast.com for access to video extras, subscriber-only trade ideas, all of Dan's real covered call and cash-secured put trades, monthly AMA webinars, and unusual options activity alerts   Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

In this episode of Wealth Building with Options, Dan sits down with James Kostulias, Head of Trading Services at Schwab—where he oversees the end-to-end trading experience for clients at a firm averaging over 7 million trades per day for three consecutive quarters. From Schwab’s latest Q4 Trader Sentiment Survey to the dramatic evolution from “options are too risky” to “options as risk management tools,” James shares an insider’s view of how retail trading has fundamentally transformed. If you've ever wondered how serious traders think about hedging, income generation, and adapting to different market regimes, this conversation is packed with insights you can put to work in your own trading. Listen, You'll Discover Why traders are “bullish but cautious” right now — How Schwab’s Q4 Trader Sentiment Survey shows more than half of respondents are bullish on the market long term—while a growing majority (66%, up from 56%) also think it’s overvalued in the short term. How options fit a bullish-but-worried mindset — The specific ways traders are using stock replacement, covered calls, hedging, and other options strategies to stay invested while managing downside risk. The evolution of the retail options trader — How clients have shifted from viewing options as “too risky” to using them as core risk-management tools—and why 1 in 3 traders (versus 1 in 5 just two years ago) are now moving into complex options within their first year. From 90% traders to 50/50 — How Schwab’s live events have evolved from primarily attracting active traders to drawing equal numbers of long-term investors seeking to use options for income generation and risk management—a major shift in just 18 months. The education engine behind today’s options traders — A look at Schwab’s massive education effort: 30–35 hours of live webinars per week, extensive on-demand courses and articles, and 22–24 live events per year—all completely free to clients. Inside the numbers — Why Schwab’s position as the industry leader—averaging 7+ million trades daily—makes their client-behavior insights uniquely valuable for understanding real market trends. Investors vs. traders: why the label doesn’t matter — Why James believes you shouldn’t get hung up on whether you’re a “trader” or an “investor,” and how Schwab supports both ends of the spectrum with specialized desks and resources. 24/5 trading: powerful tool or dangerous temptation? — The real pros and cons of extended-hours and 24/5 trading, how U.S. clients use it episodically while international clients leverage it as their primary trading window, and why trying to be “on” around the clock can work against you. What’s coming next for options traders at Schwab — How Schwab is preparing for spot crypto trading (first half of next year), expanded CBOE options hours (one hour earlier, 15 minutes later), and single-stock 0DTEs (expected in a Q1 launch window)—and why doing it “the Schwab way” means platforms, risk tools, and education must all be ready before launch. The one skill James thinks traders must develop — His biggest piece of advice: learn to adapt your strategies to changing market conditions instead of forcing one “favorite” strategy on every environment. Guest Bio – James Kostulias James Kostulias is Head of Trading Services at Schwab, where he oversees the end-to-end trading experience for clients, including the award-winning thinkorswim suite of platforms. With more than 25 years in financial services—much of it with TD Ameritrade in retail, technology, and active trader leadership roles—James has been at the forefront of the industry’s evolution from “options are too risky” to “options as risk management.” He has served as a board member and former president of the Wall Street Technology Association, previously sat on FINRA’s Technology Advisory Committee, and is a graduate of the SIFMA Securities Institute program at Wharton. He holds a B.A. in Business Administration from Rutgers University along with Series 47, 24, and 63 licenses. Resources & Links Schwab Q4 Trader Sentiment Survey – quarterly insights into trader sentiment, available at Schwab.com Schwab Trading Activity Index (STAX) – monthly insights into actual client trading behavior, available at Schwab.com Learn more about options education and coaching with Dan at MarketTaker.com Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons  Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Why Traders Lie to Themselves — and How to Stop When it comes to covered calls and cash-secured puts, most traders tell themselves comforting half-truths: “I’d be fine owning the stock if it drops.” “I’d be fine selling my shares if they get called away.” But when those scenarios actually happen—when a stock gaps lower or rallies far past a strike—those same traders often panic, blame the market, and forget the plan they swore they’d follow. In this episode, Dan Passarelli unpacks the psychology behind these lies and how to replace emotional trading with data-driven discipline. Through relatable stories (including a red-light ticket and an ancient Roman twist), Dan shows why even the smartest investors fall into the trap of self-deception—and how to break free from it. In This Episode Why traders say they’re okay with assignment—but secretly aren’t How cash-secured puts and covered calls reveal your true comfort with risk The real “sweet spot” where these strategies outperform the market How to use data and visualization to make smarter, more objective decisions What mirror neurons and Michael Jordan can teach you about trading mastery How to “outhuman your humanness” by training your brain to respond with logic instead of emotion Key Takeaway You can’t control the market—but you can control how you react. When you make trading decisions based on logic and data, not emotion or ego, you gain a consistent edge. Covered calls and cash-secured puts might not make you rich overnight—but they can help you steadily outperform by losing less when others panic. Subscribe & Support: WealthBuildingPodcast.com — Get access to video extras, subscriber-only trade ideas, Dan’s real covered call and cash-secured put trades, monthly AMAs, and unusual options activity alerts. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/ -- License: Attribution 3.0

Episode 38: The Objective of My Affliction 95% of traders lose money. Not because they're not smart—but because they're missing something fundamental. In this episode: What if most traders are making the same mistake with every single trade? What's the simple two-word framework that changes everything? Why don't even experienced traders understand the real secret to consistent profitability? What if you could improve your results overnight with one mindset shift? This episode is short but mighty. Discover what separates the winning 5% from everyone else.     Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0

Summary: Dan Passarelli sits down with coach John Kmiecik to unpack why smart traders still struggle with losses, risk, and variance—and how to reframe decisions using Prospect Theory. They cover loss aversion, the disposition effect, myopic loss aversion, “house money” mental accounting, and practical coaching tactics (like multiple exits and portfolio-level thinking) to build discipline. Dan also corrects a note from last week: neuroscientist John Coates earned his degrees at the University of Cambridge. Key Takeaways Prospect Theory in practice: Most traders feel losses about twice as strongly as equivalent gains, which skews decisions if left unmanaged. Loss aversion shows up everywhere: Hesitating to take small losses, rolling losers “to get back to even,” and cutting winners too early. Myopic loss aversion: Staring at a single position and checking P&L too often leads to reactive choices; think in portfolios, not trades. Multiple-exit approach: Taking a small, early profit can make it psychologically easier to hold for the primary target. Variance desensitization: You must get comfortable with swings; focus on net outcomes over a series of trades, not tick-by-tick moves. Mental accounting pitfalls: “Playing with house money” is a trap—capital is capital, regardless of where it came from. Framing matters: “Selling a put” can be reframed as “agreeing to buy shares at a discount with volatility rebates,” then managed by plan. Preparedness beats FOMO: If you miss a setup, another will come. Have every “twist and turn” covered in your plan before the trade. Practical Tools Mentioned Multiple-exit method: Scale out (e.g., take a small “comfort” profit, then hold for the main target). Portfolio-level targets: Judge results over a basket of trades, not a single outcome. Account hygiene: Close the P&L window when it provokes impulsive behavior. Pre-mortems: Visualize assignment, gaps, and management steps before you enter. Links & Resources Become a paid subscriber for video extras and trade ideas: wealthbuildingpodcast.com Learn more about Dan Passarelli and Market Taker Mentoring: markettaker.com About the Guest John Kmiecik is a senior coach at Market Taker Mentoring. He works 1-on-1 with traders on strategy selection, risk management, and the psychology required to execute consistently. Support the Show Subscribe on your favorite platform (Apple Podcasts, Spotify, etc.). Ratings and reviews help more traders find the show—thank you for spreading the word. This is an ad-free podcast. Paid subscriptions keep it going and unlock members-only benefits. Disclosure: Options involve risk and are not suitable for all investors. Prior to buying or selling an option, investors must read Characteristics and Risks of Standardized Options (ODD) which can be found at https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document Don’t trade with money you are not prepared to lose. Anything discussed on this show is intended to be generalized information and not intended to be a recommendation to buy or sell any security. The host and guests are not familiar with listeners’ specific situations. For trading information relevant to your specific needs, speak with a licensed broker or advisor.   Trumpet Trumpet Fanfare by bevibeldesign -- https://freesound.org/s/350428/ -- License: Creative Commons 0 Wah Wah Wah Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0 Dramatic Drum Roll dramatic drum roll.wav by ingsey101 -- https://freesound.org/s/51401/  -- License: Attribution 3.0