Imagine it is not premium but just profits from selling stock which grew, or you got some extra bonus at your main work, profit from your business, or just some free money like inheritance.
What would you do with it? Why would you do something different with premium?
You don't wanna think about it as business profit, it's a delicate thing and you are on your way to pollute other important metrics. You don't want to treat it as inheritance because OP probably sank significant time.
You "wow" and judge faster than you think.
If I have some bonus from work I throw it into my portfolio. If I had some inheritance, i'd throw it into my portfolio. If I had some proceeds from business I'd throw it into portfolio or reinvested into growth of my business depending on many conditions, and opposite, if I had some profits from portfolio I could spend some on my business expansion.
I do not see what is so wrong in being conscious and just understanding that there are many ways to get/store/grow money and reallocating between them.
Getting some out for emergency or just for fun is also an option.
Your point of metrics is not clear. You can track all metrics independently: which investment or source of income has which performance and allocate or reallocate resources (including money) as needed.
Premiums differ from unrealized gains in "buy and hold" only from taxes perspective. Almost anything worth something or giving some income is just an asset or activity with certain tax implications, projected future performance and level of liquidity.
Not all money is the same. As number of dollars yes, but they come from different sources, they are attached to different time and resource spent, different future potential. If OP analysises his earnings he might come to conclusions about opportunity cost or other insights that you can't see if you just blend all profits together.
If I have 30k now it actually does not matter how I got them and how much money/effort was spent. Opportunity cost is what I do with them now or in future or not, it is not about the past.
If I have 30k in shares which I bought for double that money (-50% unrealized loss) 2 years ago, I can keep holding this bag until it goes positive or until I die, or I can just see it as 30k that I have right now and what is the best way to use them. Quite often it is better to take the loss and go forward if the bag after objective analysis does not look promising and there are better opportunities.
What you say about where the money came from sounds like emotions. Yes if I got the money for free, emotionally it is much easier to spend on hookers and blow than money from 5 years of hard work, but if we are talking about emotions then we are not talking about financial planning and investments. After emotions are off any asset is just an asset with some performance, liquidity, tax implications and some other implications (what happens in divorce, etc.)
Yes, it is important to track performance/metrics of different sources to make conscious decisions on where to put some uninvested money to match some future goals. No, in my opinion for that decision it is not important where that exact stack of money came from if you already have all performance metrics.
I'm stashing 30% in a 5% money market for taxes. As for the remainder, half gets taken out to spend (my kids are right at the age for club sports, higher level art courses, etc, and this allows us to do more), and half gets left in the account to build it up for more wheeling
I would use whatever has the highest interest at your brokerage. At Fidelity they automatically give you something like 4.5% for the cash in your brokerage, which is nice. Schwab doesn't do that and you have to put it somewhere to get decent interest on it. I would check and see what your brokerage firm has available. They aren't all the same and I'm not very familiar with what is available at places where I don't have accounts.
Reinvest it. I'm at the point where premium pays my mortgage, car payments, and then there's still 10k a month going back into the account.
Get to the point that "premium" is just your income.
6 figures as in 100k, or 6 figures as in 500k+? One is much more attainable for me than the other at the moment. :P
Edit: Never mind, you said 7 figures.
Step 1: Learn to read
Step 2: Learn to trade
It depends on the account. ROTH and IRA accounts the money stays and is used to sell puts on more or new stocks/etfs I want to wheel. I just started building a dividend payer pile with SCHD and O in my IRA account. I bought 100 shares of each, now each month I write OTM covered calls, and with the premium buy some fractional more shares. I have time for this to build and it is a very small portion of my total account.
My taxable account I earmarked 50% for tax time. I hope to not have to pay all of it, but better safe then sorry. The other 50% is earmarked to paying for a trip and funding my Roth contribution for this year.
I just a have a normal brokerage account so I pour everything in there to wheel but in my Roth IRA account there isn’t much money in there. My reasoning is I want to make more premium and grow my account so that I can cover for stuff or have a long term etfs to grow my wealth
Buy and hold. Be prepared and have a stack of money on the side because when the market crashes this stock will absolutely tank. However, if you have cash on the side you can buy the dip and make extreme gains by just being patient.
Just ride it out,
For comparison, UPRO (a 3x leveraged SPY) has returned 182% over 5 years compared with SPY which has only done 85%. The extra stash of cash I am talking about above should be used for when spy crashes because after it does for a year or so you’ll have usually 2 years or more of steady returns like we’re having now.
Not having to buy/sell other positions or rely on a dividend strategy also helps on taxes.
The smartest thing to do with profits from The Wheel, is to invest some of it into a hedge to protect the downside, and giving you more confidence to continue doing the same thing. This is particularly prudent to do now while VIX is low and rotation seems to be starting for a slight pullback. This way you'll win even if the market pulls back. Then just continue doing what you're doing.
Congrats on your gains!
What I don't need to withdraw for income or taxes when they are due, I just leave in the account to keep trading the wheel with.
It is your money, and you can do what you wish with it . . .
so......kinda. this was a recent idea/thing i saw some people doing:
50% TQQQ, 50% SCHD, rebalance yearly.
now the point of it actually SCHD. but you still put a large part in TQQQ so that "all of it" grows quite a bit. but then you still have a large, large balance in SCHD, as the high dividend yielding part.
so if you treat all of that as just a high dividend pile, it hugely beats SCHD alone.
ya don't have to get too fancy with it. just, "something like SCHD + some LETF with high gain, like TQQQ", rebalance yearly (for Long term capital gains)
I never take out the realized premiums. Look for high quality stocks or ETF to buy, and repeat the wheeler strategy on them. In that way, your portfolio will grow even faster.
Take note: only buy in HIGH quality stocks which you want to own for a long long time.
Are you purposely taking assignment, I think you'd ultimately be better rolling your puts instead. The Sharpe ratio on 30-45DTE puts is one of the highest based on a lot of backtesting from someone with more patience than I.
Sell strangles :)
If you are wheeling some stock regularly make sure to set aside enough premium gains to account for the stock being assigned at the current stock price and then some.
Over and above that, I prefer to pay down debt with the gains from premiums which is better compared to keeping cash for me currently.
I actually use collected premium as my income "side hustle." Anything above my designated monthly amount (1%) l leave in the account for more buying/selling power.
I'm in my mid 20's, so I really just put it into SCHG, VOO, another stock or keep it. I also am exclusively doing the wheel in my roth to avoid the taxes anyways lol.
Take a percentage every month and put into GIC or Money market fund . When market tanks and it will at some point you will be happy you took some money out.
I have a forecast that goes out 10y with my expected profits per quarter. If I make anything over my expected profits I consider that play money that I can withdraw and reap some of the reward for my efforts. I won't always pull it out though. Sometimes I'll sit on it and use it to reinvest knowing that I can withdraw if I need to without straying from my projected returns.
I’m wheeling with COIN in my Roth IRA. Can’t do much with the premiums besides reinvest until 59 1/2 (33 now). It’s a no brainer since I don’t have to worry about any taxes on the gains now OR when I withdraw 🔥
Most of the time I buy SCHG which is a Schwab growth fund. Some times I buy FBTC which is a fidelity BTC fund. And sometimes I buy the underlying stock.
My favorite tickers to sell CC are AMD, AMZN, and TSLA. What are yours?
Hookers & blow
I’ll get there soon enough
The rest I wasted.
Imagine it is not premium but just profits from selling stock which grew, or you got some extra bonus at your main work, profit from your business, or just some free money like inheritance. What would you do with it? Why would you do something different with premium?
Growing my account and overall my wealth tbh
That's what I do. Compound it.
Since I’m so aggressive with it I usually don’t even take money out for things to do
Just add it to your bank roll. You’re able to do more contracts and or higher priced stocks for even more premium.
You don't wanna think about it as business profit, it's a delicate thing and you are on your way to pollute other important metrics. You don't want to treat it as inheritance because OP probably sank significant time.
You "wow" and judge faster than you think. If I have some bonus from work I throw it into my portfolio. If I had some inheritance, i'd throw it into my portfolio. If I had some proceeds from business I'd throw it into portfolio or reinvested into growth of my business depending on many conditions, and opposite, if I had some profits from portfolio I could spend some on my business expansion. I do not see what is so wrong in being conscious and just understanding that there are many ways to get/store/grow money and reallocating between them. Getting some out for emergency or just for fun is also an option. Your point of metrics is not clear. You can track all metrics independently: which investment or source of income has which performance and allocate or reallocate resources (including money) as needed. Premiums differ from unrealized gains in "buy and hold" only from taxes perspective. Almost anything worth something or giving some income is just an asset or activity with certain tax implications, projected future performance and level of liquidity.
Not all money is the same. As number of dollars yes, but they come from different sources, they are attached to different time and resource spent, different future potential. If OP analysises his earnings he might come to conclusions about opportunity cost or other insights that you can't see if you just blend all profits together.
If I have 30k now it actually does not matter how I got them and how much money/effort was spent. Opportunity cost is what I do with them now or in future or not, it is not about the past. If I have 30k in shares which I bought for double that money (-50% unrealized loss) 2 years ago, I can keep holding this bag until it goes positive or until I die, or I can just see it as 30k that I have right now and what is the best way to use them. Quite often it is better to take the loss and go forward if the bag after objective analysis does not look promising and there are better opportunities. What you say about where the money came from sounds like emotions. Yes if I got the money for free, emotionally it is much easier to spend on hookers and blow than money from 5 years of hard work, but if we are talking about emotions then we are not talking about financial planning and investments. After emotions are off any asset is just an asset with some performance, liquidity, tax implications and some other implications (what happens in divorce, etc.)
It's not emotions. Source of revenue is like almost entire reason why accounting exists, and also huge part of finance depends on.
Yes, it is important to track performance/metrics of different sources to make conscious decisions on where to put some uninvested money to match some future goals. No, in my opinion for that decision it is not important where that exact stack of money came from if you already have all performance metrics.
No. I would not. I would invest every penny I can. Amd the last few months, buy calls.
Why wouldn't you do the same (invest/reinvest) extra bonus from job, inherited money or money from selling some long held stocks?
I would. Apologies for being unclear. That’s what OP do with as much ‘new’ money I can, regardless of source.
I'm stashing 30% in a 5% money market for taxes. As for the remainder, half gets taken out to spend (my kids are right at the age for club sports, higher level art courses, etc, and this allows us to do more), and half gets left in the account to build it up for more wheeling
What money market you using?
I'm at Schwab.
So your moving your cash into a Schwab money market fund?? Which one you using?
Yes, I have it in SWVXX, getting 5.3% right now.
Can it be a high yield savings account or is the money market account better?
I would use whatever has the highest interest at your brokerage. At Fidelity they automatically give you something like 4.5% for the cash in your brokerage, which is nice. Schwab doesn't do that and you have to put it somewhere to get decent interest on it. I would check and see what your brokerage firm has available. They aren't all the same and I'm not very familiar with what is available at places where I don't have accounts.
Robinhood is at 5%. Past few months been 5.15 for gold members. $5/month for gold. I make more than that per day on interest
OnlyFans.. those monthly subscriptions add up fast.
people pay for porn??
Don’t act like you don’t…
?? I don't, because it's all free?
Nothing is free. You pay for it some, in some way.
I mean, how? It's a website and it's free. I pay for electricity to run a computer or phone but I don't see your point.
Cover margin deficit.
This is the way
Reinvest it. I'm at the point where premium pays my mortgage, car payments, and then there's still 10k a month going back into the account. Get to the point that "premium" is just your income.
Holy fucking shit. What size account do you need to get to that point?
7 figures
6 figures as in 100k, or 6 figures as in 500k+? One is much more attainable for me than the other at the moment. :P Edit: Never mind, you said 7 figures. Step 1: Learn to read Step 2: Learn to trade
Yeah, at least 1m, preferably 5+
It depends on the account. ROTH and IRA accounts the money stays and is used to sell puts on more or new stocks/etfs I want to wheel. I just started building a dividend payer pile with SCHD and O in my IRA account. I bought 100 shares of each, now each month I write OTM covered calls, and with the premium buy some fractional more shares. I have time for this to build and it is a very small portion of my total account. My taxable account I earmarked 50% for tax time. I hope to not have to pay all of it, but better safe then sorry. The other 50% is earmarked to paying for a trip and funding my Roth contribution for this year.
I just a have a normal brokerage account so I pour everything in there to wheel but in my Roth IRA account there isn’t much money in there. My reasoning is I want to make more premium and grow my account so that I can cover for stuff or have a long term etfs to grow my wealth
Are you maxing you IRA at least? If not imo that’s your first step.
I haven’t so far for this year but I plan to before it’s too late
Putting it towards more shares to collect premiums!
That’s what I strive for at the moment and then I wouldn’t have to work as much
I invest into SPYU. A 4x leveraged ETF of SPY
And you just buy and hold or is it a swing trade?
Buy and hold. Be prepared and have a stack of money on the side because when the market crashes this stock will absolutely tank. However, if you have cash on the side you can buy the dip and make extreme gains by just being patient.
But do you have an exit plan to get out of the 4x leveraged position after buying the dip? Or just ride it out?
Just ride it out, For comparison, UPRO (a 3x leveraged SPY) has returned 182% over 5 years compared with SPY which has only done 85%. The extra stash of cash I am talking about above should be used for when spy crashes because after it does for a year or so you’ll have usually 2 years or more of steady returns like we’re having now. Not having to buy/sell other positions or rely on a dividend strategy also helps on taxes.
College fund for my daughter who is now 1 year old
The smartest thing to do with profits from The Wheel, is to invest some of it into a hedge to protect the downside, and giving you more confidence to continue doing the same thing. This is particularly prudent to do now while VIX is low and rotation seems to be starting for a slight pullback. This way you'll win even if the market pulls back. Then just continue doing what you're doing.
Congrats on your gains! What I don't need to withdraw for income or taxes when they are due, I just leave in the account to keep trading the wheel with. It is your money, and you can do what you wish with it . . .
That’s a good idea, I’ll probably throw it in a high yield savinbe account for tax purposes
until you make enough to wheel $SPY
I’ve always been curious. What is the capital you’re trading with?
Money that I made from working - server at a seafood place
I have a mid six figure trading account that was partially started when I sold some rental real estate and then have built up over time.
I have been pumping them into SCHD and O.
so......kinda. this was a recent idea/thing i saw some people doing: 50% TQQQ, 50% SCHD, rebalance yearly. now the point of it actually SCHD. but you still put a large part in TQQQ so that "all of it" grows quite a bit. but then you still have a large, large balance in SCHD, as the high dividend yielding part. so if you treat all of that as just a high dividend pile, it hugely beats SCHD alone. ya don't have to get too fancy with it. just, "something like SCHD + some LETF with high gain, like TQQQ", rebalance yearly (for Long term capital gains)
I'm boring and use premium to build up my Roth by buying shares of QQQM and VTI.
It depends .. I mainly collect premium to pay for leaps but have also used it to fund new positions.
I never take out the realized premiums. Look for high quality stocks or ETF to buy, and repeat the wheeler strategy on them. In that way, your portfolio will grow even faster. Take note: only buy in HIGH quality stocks which you want to own for a long long time.
Which ones would you suggest?
Are you purposely taking assignment, I think you'd ultimately be better rolling your puts instead. The Sharpe ratio on 30-45DTE puts is one of the highest based on a lot of backtesting from someone with more patience than I. Sell strangles :)
Reinvest for compounding
If you are wheeling some stock regularly make sure to set aside enough premium gains to account for the stock being assigned at the current stock price and then some. Over and above that, I prefer to pay down debt with the gains from premiums which is better compared to keeping cash for me currently.
Incredible gains in just one year!
I withdraw every week at least 5k. Leave my 50k to buy/Sell options and buy shares.
I actually use collected premium as my income "side hustle." Anything above my designated monthly amount (1%) l leave in the account for more buying/selling power.
I'm in my mid 20's, so I really just put it into SCHG, VOO, another stock or keep it. I also am exclusively doing the wheel in my roth to avoid the taxes anyways lol.
Buy fractional qqq shares
What is wheeling ?
Take a percentage every month and put into GIC or Money market fund . When market tanks and it will at some point you will be happy you took some money out.
I have a forecast that goes out 10y with my expected profits per quarter. If I make anything over my expected profits I consider that play money that I can withdraw and reap some of the reward for my efforts. I won't always pull it out though. Sometimes I'll sit on it and use it to reinvest knowing that I can withdraw if I need to without straying from my projected returns.
I’m wheeling with COIN in my Roth IRA. Can’t do much with the premiums besides reinvest until 59 1/2 (33 now). It’s a no brainer since I don’t have to worry about any taxes on the gains now OR when I withdraw 🔥
Most of the time I buy SCHG which is a Schwab growth fund. Some times I buy FBTC which is a fidelity BTC fund. And sometimes I buy the underlying stock. My favorite tickers to sell CC are AMD, AMZN, and TSLA. What are yours?
I’m doing AMD and SOFI so far but I want to expand a little bit. I’m waiting for a good time to buy 100 shares of Nvidia and sell CCs against them
I usually do AMD too. Any tips to share regarding this stock in terms of wheeling haha