So in this video, I want to talk
about what to do when you're getting
assigned with a Wheel Trade.
In previous videos, I have
shown you The Wheel strategy.
It's a strategy that I've been
trading for several months and
I haven't had a single
losing trade yet,
knock on wood. So I received
a lot of comments on my videos
asking, "Yeah.
That's all good.
But what do you do when
you get assigned and the market
crashes?" And that's exactly
what we are going to talk about
today. And I couldn't have
timed it more perfectly because
today the markets are plummeting.
Little bit earlier today, they were
down more than 3%.
And it is a bloodbath.
So this is a perfect
day to show you what to do.
Are you ready?
OK. Cool.
Then I want to show my
TQQQ trade as
an example. So right now,
let me just show you.
I have three Wheel trades in
my account.
Again this week I'm trading a little
bit lighter because we have the
elections coming up in just a few
days and there's a lot of
uncertainty.
So we will talk about the TQQQ
trade, where you see right now the
open P&L is -$2,667.
So what does this mean?
Does it mean that we do
have a big loss here?
No. I want to show you exactly
what happened, how I am managing
the trade, and then I'll show you
some more examples.
So this video is all
about what to do when you get
assigned and what if the market
crashes.
So as an example, I'm using the TQQQ
trade.
The trade started on September
3rd. So I want to really dissect
it here. Step by step
I want to show you exactly
what I did on September
3rd right here.
September 4th I
started trading and I sold
150 put for $0.66.
So which is $66 because
I traded one contract.
A day later I got assigned.
I got assigned because
when you're selling puts
it means that if the stock goes
below 150, which it did,
which it did a day later when it was
expired, I got assigned.
So first of all, this is where I
made $66 and
then I got assigned 100
shares at $150.
However, here's the deal.
Since I sold the put for $0.66
this means that my cost basis,
since I keep the money, whether I am
assigned or not, I keep the
premium that I signed it for.
So this means that
150 minus 66,
my cost basis now is
$149.34
because I made $0.66.
Now doesn't sound a lot, but it
basically means that the stock now
does not go above 150
anymore.
As soon as TQQQ
goes up to $149.34
I'm breaking even.
Now if it goes above this, I'm
making money.
Making sense thus far?
OK, so let's talk about
the next trade that I did.
So this is when I sold
155 call for
$2.10, you can see it right here.
And I bought it back for $0.37.
So let's use our handy dandy
calculator and
$2.10 minus $0.37,
so this means here I
made $173.
And now my cost basis gets
reduced by another
$1.73.
Because, you see, even though I have
the stock, this is where we are
selling the call. As you know, the
Wheel strategy consists of five
steps, here they are.
And I'll link to a video in the
description here.
So you sell a put option and when
you get assigned, we will sell
calls and collect the premium.
So let's go back to our trades
here. So now our cost basis
is going lower.
So we take the
$149.34 and we got
$1.73,
so our cost basis is now
$147.61.
Meaning that if the stock goes back
to $147.61 we
are break even and if it
goes above we are making
money. Making sense?
OK, good.
So now I sold
the September 80 call,
the September 18 150
call, for $0.45.
So not a whole lot but
we bought it back as you can see
here, for $0.05.
So this means at this point we
made another $40, bringing
our cost basis down by another
$0.40 to $147.21.
So and we keep doing this
right now, $147.21,
so as you can see, the stock
is actually going against us.
See, it was going down, down, down,
down, down, down, right?
And this is what many of you are
concerned about.
"Aaagh, What do I do if the stock
keeps going down?" Well, you keep
selling premium, and by doing
so, you're lowering the cost basis.
But let me show you something
really, really cool that I did next.
So next, I sold
actually two puts
for $110
and $118.
So that's $114.
OK? And I bought them back at $0.06.
This means $114
minus $0.06.
So we made another
$108 here.
Now I'll explain in a moment why
I sold a put here,
right? Even though right now we own
stocks and we should be selling
calls. But there's a very specific
reason for it and I'm going to show
it to you.
Anyhow, now we are lowering
our cost basis to
$146.13. And here's what we did
next. So next, after we sold
the puts and they expired worthless
I actually there
sold another 100 put.
So we sold another 100 put for
$2.40 and bought it back for $24.
So we made another
$216 here.
Bringing our cost basis down
again from
$146.13 minus
$2.16
to now
$143.97.
All right. Next step.
You see, this is what the Wheel
does. You can sell premium
while you own the stocks.
And so let's take a look.
So I then sold
$150 call
for
$1.57, bought it back at 15.
So this means that I made another
$142
bringing down my cost basis
again to
$142.55. Now, I don't
want to bore you and make this video
too long here.
But long story short, as you can
see, I sold
a few more of the calls
and I bought them back.
So overall, overall right
now by just selling premium,
and I still have the stock.
I still have the stock and the
stock, oh, my gosh is down $2,770.
However, by doing this,
by selling more and
more calls and puts here,
I was able to make
$1,748. This is where I want to just
fast forward here, so the total
is $1,748.
So this means it's $17.48,
so that I made on these
100 stocks. So if you take the 150
minus $17.48
right now, right now my cost
basis to break even
on this trade is
$132.52. So as soon
as TQQQ goes
back to
$132, which is right here, if we dip
a little bit above, until yesterday
I was positive on this trade.
And you see if we only come back
from $122 to
$132.52 then we are OK.
Now what happens if TQQQ
keeps going down?
I will keep doing what I did.
What you see here, I mean there's so
many call options that I sold
where I kept the premium to
lower my cost basis here.
And I'll keep doing this
until at some point
I'm making a profit on the trade.
So right now, if you look at this,
if you look at the TQQQ line.
Yes, if I would close the
trade right now, today, which
would be the worst day to close it,
I would be down $1,000.
Until yesterday, this was green.
And as you can see, all of
these are green besides
this one trade.
By the way, all of these are the
trades that I did and if we sort it
by realized year to date,
you see that there's three stocks
sticking out.
Apple, TQQQ,
WYNN and TRGP.
Out of the
$12,000 that I made,
$12,500, four stocks,
four stocks are responsible for
half of the profits.
Now these three
Apple, TQQQ
and TRGP that's
where I got assigned. You see, and
WYNN as it seems right
now, if we are looking at WYNN, we
might get assigned because
if it doesn't close above 70
by Friday, I get assigned.
But you see, here's the deal.
I don't care.
That is part of the
strategy.
Let me just bring up the strategy
here one more time, because it's
very important that you understand
before you trade this strategy
that you know what's happening.
The first three steps are
that we are selling puts and
collecting premium.
Now, if we get assigned,
it's step 4 and 5.
If we get assigned, we will
sell calls.
And as you can see, steps four and
five are the ones that make me
money.
So now you know what to do
when you get assigned and hopefully
it becomes less scary for
you. Because I look forward to
getting assigned because that allows
me to sell calls
and make even more money.
And if the stock
keeps going down as TQQQ
here, I'll just keep selling.
I'll keep selling.
And you see, I will lower my
break even more and
more and more with every
single option that I sell
I'm lowering my break even.
So, right now, TQQQ
does no longer have to go all
the way up to 150.
It only needs to go up
to
$132.52.
And I'm pretty sure that tomorrow
I will sell another option,
lowering my cost basis even
more.
So that is the key here.
Anyhow, I know that many people
who are trading this strategy are
concerned like, "Oh my gosh, what
if I get assigned?" It's a good
thing. It's a good thing and now
you know why.
Let me ask you this, was this
helpful at all so that you know
what to expect when you are getting
assigned?
And if you enjoyed this video and
found it helpful, do me a favor and
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