In this episode of Wealth Building with Options, Dan Passarelli dives deep into the motivations behind trading the wheel strategy—and why understanding them can make or break your results.

Dan begins with a mistake he sees all too often: traders push strikes too far away from the stock price, "running and hiding" instead of sticking to their true objective—getting assigned—which undermines their entire strategy. From there, he lays out the framework of the who, what, and why of the wheel strategy:

Who trades the wheel?

• Primarily conservative investors seeking consistent income without intensive labor.


• Dan personally uses it as a conservative investor 97% of the time, with only 3% reserved for risk-taking.


• The strategy also attracts traders looking for short-term "skate" opportunities—though Dan notes credit spreads might be better suited for that objective.

What is cycling into wheel trades?

• Own stock → sell a call → skate and collect premium → sell another call → get assigned and sell the stock.


• Then sell a cash-secured put → skate → get assigned and buy the stock back → sell calls again.


• This creates the repeating "wheel" cycle.

Why trade the wheel? Dan highlights both trade objectives (intentionally getting assigned into or out of stock) and skate objectives (capturing premium without assignment). For cash-secured puts with trade objectives, he identifies three main sub-motivations:

• Buy stock below current market price for long-term holding.


• Buy stock to begin the wheel strategy.


• Buy back stock from a previous covered call assignment.

The Cycle Mindset Revolution

A key takeaway: successful wheel trading isn't about the profitability of individual trades, but about completing profitable cycles. Dan explains how traders can recover from losses by continuing the sequence until the overall cycle closes in profit: "I sold this put at $1 and now I have to buy it back at $2.50. I'm down $1.50 but I sell another put at $1.25... It took me 3 trades to lock in 50 cents. That is a completed cycle." This mindset shift—focusing on cycles rather than one-off wins—separates successful wheel traders from those who give up too early.

Professional Insights

Dan also reveals how professional traders approach the wheel differently. Instead of hiding far out-of-the-money, institutional traders often sell "500, 1000, 2000 puts right at the money," showing why proper strike selection is critical when the goal is assignment.

Whether you're new to the wheel or already using it, this episode will fundamentally change how you think about each trade within the larger cycle—and why patience with the process, not individual results, drives long-term profitability. By the end, you'll understand why focusing on cycles, not individual trades, is the key to wheel success.

Resources & Links:

• Learn more about Dan and Market Taker Mentoring at MarketTaker.com


• Become a paid subscriber by visiting https://wealthbuildingpodcast.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 0

Wah Wah Wah

Wah wah trumpet failed joke punch line.wav by Doctor_Jekyll -- https://freesound.org/s/240195/ -- License: Attribution 4.0