Let's actually talk about a trade
that we did with The "Wheel." Now
the Wheel is an options trading
strategy, where first we are selling
puts to collect premium, and then
once we get assigned the stocks
we're selling calls to collect
even more premium.
As you know, recently we started
trading the Wheel. We had 10 or 12,
maybe even 14 winning trades
in a row.
That was fantastic.
And today, let's talk about
a specific trade that happened,
the Uber trade where we got assigned
the shares.
So let's jump here on the screen
because I want to show Uber
as an example here.
So Uber, when we are doing the
Wheel it consists actually
of three trades.
The first is that we are selling
puts and the idea here is to collect
premium and to get assigned
stocks at a discount, to buy
stocks at a discount at
a lower price than they are trading
right now.
Then once we have the shares,
we are selling calls.
So let me walk you through step
by step of exactly how it
works. So let's talk about
the first trade that we did here
and for the first trade, we
were selling puts.
So let's take a look at the very
specific example here.
We have the trades.
I am going to the trade history,
I am looking at year-to-date, and
I want to know actually the
transactions for the last,
let's say, 30 days.
And I want to look at Uber.
I'll show you the other trades here
as well I just want to look at this
one here in particular.
So as you can see, we sold
7 August 14, 30 puts
at $0.25.
So this is $25 per option.
So let's use the handy dandy
calculator and type
in 7 because we sold
7 of these, times 25
so we did collect $175.
So $175 we did the
first trade on August 7th.
So this is where we collected
$175 in one week,
a little bit less than one week.
The idea here was that Uber was
supposed to stay
above 30 because if Uber
would stay above 30, we
would just collect the premium,
a week later they expire
and we can move on and selling more
calls. And let's actually
look at what happened year to date
and as you can see, one, two,
three, four, five, six, seven,
eight, nine, ten, eleven
or twelve winning trades in a row
here. OK.
So then here is what happened
Uber, as you can see, dipped
below the magic 30
here. And here's what happens.
If it would have stayed above
30 we would just collect the
premium, be happy, and
sell more puts again.
But here we got assigned the
shares. So we had
to buy the shares and this is
actually the second part of the
trade. This is what the broker did
for us automatically.
We bought
Uber at 30.
Now, here's the deal, for
every one put that
you're selling you have to buy
100 shares.
Now, something odd happened here.
I want to go back to Uber and show
you the transactions over the last
30 days.
So I should have received
700 shares of Uber
in my account because this means
when you're selling puts, it means
that you have to buy at the strike
price that you're selling it.
By the way, if you're not familiar
with the strategy, I'll link to the
strategy in the description.
I did a video explaining it in more
detail and right now, I want to walk
through a very specific trade.
So since I sold 7
puts, I should have received 700
shares. But for
one reason or another, I only
received 400 shares.
Kind of a bummer, but it is
OK. So let's just write it down
here. Now, this premium
since we sold it, we are going to
keep. Whenever we sell a premium,
we are going to keep this premium no
matter what happens.
Okay?
So now 400 shares of
Uber and after we realized
that we were assigned the shares,
here is where we did the third
trade.
This is where now we start
the Wheel.
OK? So the Wheel is really, really
fascinating.
So now we sold four
calls at a strike price
of thirty-one expiring August
28th in a week from now.
And we sold those for $0.52.
So this means $52
per one option.
So this means that here 52
times
4 means that we received another
$208.
So this is premium that we received
and nobody can take this away from
us because we're not planning to
close this trade and to buy
back this call.
We would just leave it open.
So we have received here, what?
$383 already.
So let's talk about the scenarios
of what happens, because now today,
as I'm doing this video here it is
August 21st, and I want to look
at three possible scenarios
of what happens if
Uber is actually below
30 on August 28th.
So in a week from now, we want
to see what happens if Uber is below
$30.
What happens if Uber is
between $30
and $31, and we want to see what
happens if Uber is trading at
$31. These are the three
possible scenarios.
And so let's see what happens
here. First of all, the premium
that we received for the puts
here we can keep.
I mean, $175 is already
ours nobody can take this way.
So this is in all scenarios
here. So we definitely have
this. Then we receive
also the premium for the calls
that we have sold here and that is
$208 and nobody
can take this away from us.
So here now I want to say, if
Uber is trading at
$29, so let's say Uber is dropping
down. By the way, today, Uber
is right now at $30.84.
But again, we don't care where it
is today, we care where it is when
you see the green line here
and the green line is August 28th.
So let's say it is at
$29. So in this case, on
our shares, we would have an
unrealized P&L.
So this is important, unrealized,
okay, of
400 times
$1. So it would be -$400.
Now the important thing, it's
unrealized because we kind of
don't care at this point,
right? Because we're not planning to
sell Uber we are planning to
hold it, because at this point
the whole premium collected
is $175,
plus $208 so
it's $383.
This is how much we have made
and we would have had an unrealized
loss. Now, what we would do
here is sell more
calls. But we'll talk about this
here in just a moment.
Now, let's say if Uber is between
$30 and $31, let's just
say Uber is at $30.50.
So this means on our shares,
we're making $400
times $0.50.
We bought Uber shares at $30,
right now it's at $30.50 so we make
400 times $0.50.
So we're making $200
on our shares plus
we're making
$383 on the calls and
puts that we collected.
So we're making
$583. So that's not bad
at all.
But now let's say what if it is
above $31.
Now if it is above $31, it
doesn't really matter because we
sold 4 calls at a strike
price of $31.
So this means that we have to sell
Uber again at $31.
Yes, if it goes to $33, $35
we cannot participate it and
that is OK because let's take
a look at Uber here.
I mean Uber it's very likely
that it probably stays anywhere
between $29 and $31, maybe
$32, right?
If it rallies to $34 good for
Uber. Again we're talking about the
next week that's what our
outlook is here.
But anyhow, if this would happen,
we would make $1,
OK? Because we bought 400 shares
at $30 and if we have to sell
it again at $31 we make
400 times $1.
So this means that we are making
$400. OK, good.
This is how much we are making on
the stocks, and plus
the $383
that we received in premium we are
going to keep anyhow.
So obviously this is here our
best-case scenario.
So if it is below
$30, right?
We would sell calls again.
And the Wheel would continue.
If it is between $30 and $31,
we do the same we sell calls,
and if it is above
$31 we are being called
away, so we are getting rid of the
shares.
And this means that right now
we would start selling
puts again.
Anyhow, so I wanted to show you
this, and also very specifically,
where are we right now with our
Uber position?
And if you look at Uber right now,
as you can see, we are making
money on our shares and
we are losing a little bit of money
on our calls that we sold, but
right now, we are up
$292. Now we hope that by next week
we're either up, as you can see
here, $583
or
$783 and this would be the win
of only two weeks.
So this is how the Wheel
works, this is how the Wheel turns.
So that's why I wanted to do this
very specific example with you,
show you the very specific trades
that we are in right now.
And as you can see, they are working
quite well the only one that is
getting close to the strike price is
SPR but I'm not concerned
about this at all, because as you
have seen, we have thus
far a really great track record.
So all of these trades were winning
trades and I'm pretty sure that SPR
will be hanging in there.
We can talk about this next, or we
can talk about it in the deep dive
if you're live here.
I just wanted to make sure that I'm
wrapping up this video.
So let me know if this was helpful
at all. If it is, do me a favor and
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And hey, talking about other videos,
there should be some videos popping
up on the screen right now.
Just click on any of the videos and
I will see you in the next one.