PowerX Optimizer Wheel Strategy Review
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Full PowerX Optimizer Review
You can read my full review of the PowerX Optimizer that also includes the swing trading strategy and program here
The Wheel strategy is an income generating options technique where you become the seller of an options contract.
You collect a payment (the premium paid by the buyer) for selling them a call or put option. This payment is yours to keep and as long as the option you sold expires worthless then you keep it all.
The Wheel starts with selling a cash secured put. The goal is to sell cash secured puts that far out of the money so that your bet will have a very high probability of success – 90% or more.
Sure, the premium you collect will be small but it can add up fast. If you like small but reliable consistent gains then this might be a good strategy for you.
Markus from Rockwell Trading Wheel Strategy
Markus from Rockwell Trading has made a career from just constantly selling cash secured puts and selling covered calls round and around for income. This is the Wheel strategy in a nutshell.
Markus produced a very helpful tool for wheel trading and regular swing trading stocks and options. It’s called The PowerX Optimizer.
Markus has been trading for about 25 years and seems to have made a lot of money from it. He swing trades stocks but also sells cash secured puts as part of his investment strategy.
The nice thing about ‘wheeling’ is that it works well in sideways volatile markets as well as trending markets. This is because you are using the time decay inherent to options decay to your advantage. It doesn’t matter so much what the direction of the market is!
You don’t want a strong trending market for the wheel strategy – you just want time to go by and the options contracts that you sold to expire worthless.
Rockwell Trading Wheel Strategy
You do need a minimum of $10,000+ in cash to really work the Wheel strategy. This is because you need enough capital as collateral for each position.
You also need to have multiple positions on simultaneously and the capital can be tied up for a couple of weeks per position.
The goal with the Wheel strategy (what Markus does anyway) is to let the options contracts expire worthless and collect 90%+ of the profits. Then repeat with covered calls.
Here is an example of the buying power required per position for the Wheel strategy.
Imagine you wanted to sell a single cash secured put on AAPL. Apple is way above $20 so you KNOW that the stock won’t fall below that within 2 weeks (or ever!).
You sell a cash secured put to some sucker that thinks the price of Apple WILL be below $20 within two weeks. He pays you a tiny amount that you keep.
The cash you need in your account for that single put is just 100 times the strike price of $20. So, for that one cash secure put you would need $2,000 of cash.
That capital will typically be tied up ‘in’ that position for 2 weeks. There is a chance that the option buyer will want to exercise the option before it expires.
How the PowerX Optimizer Works with The Rockwell Trading Wheel Analyzer
The Wheel Analyzer tool in the PowerX program helps you with the key issues that many traders face when trying to implement a wheeling trading strategy.
The software takes all the work out of trading! It will scan for you with a click of the mouse and find the best stocks to sell cash secured puts on.
The Wheel Analyzer then gives you a custom strategy based on your risk/reward tolerance and gives you the exact options contracts to sell and what price point etc.
It basically takes all the work out of it!
Scanning Using the PowerX Optimizer Wheel Analyzer
The scanner settings are fairly simple. The scanner first filters for stocks that are no cheaper than $5 per share and no more expensive than $300 per share.
Interestingly, the scanner filters for stocks that are having a red day. The scanner then finds stocks that have a high Implied Volatility (IV). It only gives stocks that have about a 40% IV.
The scanner mostly ignores the volume, open interest and liquidity of the options contracts. It isn’t that important with this strategy.
PowerX Optimizer Wheel Strategy Review: What ROI?
The wheel strategy usually returns 20%+ a year on your buying power (often much higher than your actual cash!).
This return will vary depending on the settings and strategy you use with the Wheel Analyzer. You can set it to give you contract suggestions that are further out-of-the-money if you would like to be more conservative.
This will yield lower gains than the more aggressive settings. But your risk will be significantly lower.
The Wheel Analyzer gives you a table (below) that organizes the potential trades in a way that makes it very easy to decide on which one to take.
PowerX Optimizer Wheel Strategy Review: Conclusions
The PowerX software really does all the heavy lifting for you! The work required to sell cash secured puts and covered calls is reduced to just a few minutes a day using the program.
I highly recommend the PowerX Optimizer Wheel strategy and the analyzer program that you get as part of the PowerX Strategy.
You can read my full review of the PowerX Optimizer that also includes the swing trading strategy and program here.