You may have heard of the tortoise and the hare story. So, the hare challenges the tortoise to a race and was sprinting far ahead when the race started. He got complacent and decided to take a nap. The slow and steady tortoise eventually caught up and won the race.
I started my options trading journey a year ago in late Feb 2021 and have only used 2 strategies since then, the Wheel Strategy and the LEAPS Strategy.
Back in 2021, I wasn’t really too happy to use the Wheel Strategy because I think the returns are too low for the capital that I have invested.
And when I was making crazy returns in a short period using the LEAPS Strategy, I almost wanted to abandon the Wheel Strategy.
You can refer to these threads on the insane returns that I have generated from the LEAPS strategy in 2021:
Thank You Tesla & Elon Musk For The 470% Profits
How LEAPS Options Trading Strategy Gave Me Insane Returns In The Last 4 Months
The Power Of LEAPS: Tesla LEAPS Is Up 340% In Just 18 Days
More than 80% of the 200k profits that I have made in 2021 came from using the LEAPS Strategy.
However, all good things must come to an end and without the Wheel Strategy backing me up in 2022, I probably would be having almost zero returns every month in 2022.
The stock market, especially the Nasdaq where I am heavily invested, went through a huge correction in the last 4 months and many stocks have fallen to their pre-pandemic prices.
That meant that most (if not all) of my LEAPS positions are stuck and losing value by the day. That is the risk of buying LEAPS CALL or being an options contract buyer, where time is always working against you with each passing day.
As the duration of the contract decreases by the day, the premium decreases as well. The only way to reverse this and still be profitable is for the stock price to rise.
I am glad that I reacted fast enough and started reducing my allocation in LEAPS Portfolio and shifting them to the Wheel Portfolio, which I have outlined my Year 2022 strategy in this post:
My Trading Strategies For 2022 | How Will I Trade For Monthly Income?
It is because of my Wheel Portfolio that I am still able to generate returns in the first 4 months of 2022, as seen from the below Profit/ Loss table:
I also came out with 3 strategies on how to better run the Wheel to generate more returns by rolling the contracts at different market conditions, as compared to just waiting for the contract to run its course and expire worthless.
When the market is falling, I choose to roll my sell CALL option contract:
Why I Choose To Roll My CALL Option Contract When Share Price Falls
When the market is rising, I choose to roll my sell PUT option contract:
Why I Choose To Roll My PUT Option Contract When Share Price Rises
Recently, I also came out with a new strategy of getting more out of selling covered CALL and also being able to sell at the strike price that I desire, thus achieving a win-win situation. I explain more in this post:
I Discovered A Way To Generate Higher Returns From Selling Covered CALL For Low IV Stocks Like Apple
Moving forward, I hope to leverage on the Wheel strategies that I have shared above to keep generating consistent monthly income that can help me achieve financial freedom, just as how the slow and steady tortoise will eventually win the race.
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yep. there are 2 broad classes of option strategies – those that help you get rich and those that help you stay rich. depends on one’s objective. LEAP calls belong to the first category, while wheel is the latter one.
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Hi Raymond, you are absolutely spot on! If the market stays bullish in 2021, then there is no strategy that is more powerful than the LEAPS. However, it is times like this we need to rely on the slow and steady to help us win the race, ha 🙂
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