Article
Best Stocks for the Wheel Strategy in 2025: Complete Selection Guide
Discover the best stocks for wheel strategy in 2025. Learn stock selection criteria, top picks by sector, and how to screen for high-premium, low-risk opportunities.
Table of Contents
Why Stock Selection is Critical for Wheel Strategy Success
The wheel strategy is only as good as the stocks you choose to trade. Pick the wrong stocks, and you'll find yourself stuck holding depreciating shares that nobody wants to buy calls on. Pick the right ones, and you'll generate consistent premium income with minimal stress.
The harsh reality: most traders fail at the wheel strategy not because they don't understand the mechanics, but because they choose terrible stocks. They chase high premiums on volatile meme stocks, get assigned on falling biotechs, or tie up capital in low-quality companies that offer meager premium income.
This guide will show you exactly how to identify wheel-worthy stocks using a proven 7-criteria framework. You'll learn which sectors perform best, which specific tickers experienced wheel traders favor, and—crucially—which stocks to avoid no matter how tempting the premium looks.
The Golden Rule of Stock Selection
Only sell puts on stocks you genuinely want to own at the strike price you choose. If you wouldn't be happy holding 100 shares for 6-12 months, don't sell the put. Period. This single rule will save you from 90% of wheel strategy disasters.
The 7 Criteria for Wheel-Friendly Stocks
1 High Options Liquidity
Why it matters: Illiquid options have wide bid-ask spreads that eat into your profits. You need tight spreads to enter and exit positions efficiently.
What to look for:
- Daily options volume: 100,000+ contracts
- Open interest per strike: 500+ contracts minimum
- Bid-ask spread: Less than $0.10 for ATM options
- Available expirations: Weekly AND monthly options
Pro tip: Check options volume on your broker's platform or use free tools like Barchart or MarketChameleon. If the bid-ask spread is more than 5% of the option price, liquidity is poor.
2 Moderate Implied Volatility (IV)
Why it matters: IV determines premium size. Too low and you earn peanuts. Too high and the stock is a falling knife.
Sweet spot: 15-40% IV
Too Low (<15%)
KO, PG, JNJ sometimes. Premium barely covers your time.
Ideal (15-40%)
AAPL, MSFT, JPM, BA. Goldilocks zone for wheel strategy.
Too High (>60%)
AMC, GME, biotech. High premium = high risk of permanent losses.
How to check: Most brokers show IV rank or IV percentile. Target stocks in the 20-60th percentile of their historical range.
3 Strong Fundamentals (You Actually Want to Own It)
Why it matters: You WILL get assigned eventually. When you do, you're a shareholder. Would you be comfortable holding this stock for a year?
Fundamental checklist:
- Profitable company (positive earnings)
- Reasonable P/E ratio for the sector
- Market cap > $10 billion (reduces bankruptcy risk)
- Established business model (not speculative)
- Management you trust
The "dinner test": Would you be comfortable telling your friends at dinner you own this stock? If you'd be embarrassed to admit you own shares, don't sell puts on it.
4 Dividend-Paying (Bonus Income)
Why it matters: Dividends provide extra income while you're holding shares and selling covered calls. They also indicate financial stability.
Ideal dividend yield: 1-4% annually
Benefits:
- Cash flow even if stock goes sideways
- Reduces your cost basis quarterly
- Companies that pay dividends tend to be mature and stable
- Dividends compound with your premium income
Note: Dividends aren't mandatory. Many great wheel stocks (like GOOGL) don't pay dividends but work beautifully for the strategy.
5 Optimal Price Range: $20-$200 Per Share
Why it matters: Price affects capital requirements and premium flexibility.
| Price Range | Capital for 1 Put | Assessment |
|---|---|---|
| <$20 | <$2,000 | Too cheap—low premium dollars |
| $20-$50 | $2,000-$5,000 | Ideal for small accounts |
| $50-$150 | $5,000-$15,000 | Sweet spot for most traders |
| $150-$200 | $15,000-$20,000 | Good for larger accounts |
| >$200 | >$20,000 | Limits diversification |
Account size guideline: Don't allocate more than 20% of your portfolio to a single position. For a $25,000 account, stick to stocks under $50/share so you can diversify across 5+ positions.
6 Sector Stability
Why it matters: Some sectors are naturally better suited for consistent premium income than others.
Best Sectors:
- Technology (Large-cap)
- Consumer Staples
- Financials/Banking
- Healthcare (Pharma, not biotech)
- Industrials
- Broad Market ETFs
Sectors to Avoid:
- Biotech (binary events)
- Meme stocks (retail-driven)
- Penny stocks (<$5)
- SPACs (speculative)
- Crypto-related (extreme volatility)
- Chinese ADRs (delisting risk)
7 Consistent Weekly Options Availability
Why it matters: Weekly options let you capitalize on short-term theta decay and adjust positions more frequently.
What to verify:
- Weekly expirations every Friday (not just monthly)
- Consistent liquidity in near-term weeklies
- Strike price granularity ($1-$5 increments, not $10)
Most S&P 500 stocks offer weekly options, but always verify before committing. Some mid-cap stocks only have monthly expirations, which limits your flexibility for the wheel strategy.
Best Blue-Chip Tech Stocks for 2025
Large-cap technology stocks are the workhorses of the wheel strategy. They combine strong fundamentals, high liquidity, and consistent premium income. Here are examples of commonly traded stocks:
Apple (AAPL)
ExcellentPrice Range
$165-$200
Typical IV
20-30%
Dividend Yield
~0.5%
Options Volume
2M+ daily
Why it's great: The most liquid options market in the world. Tight spreads, consistent premiums, strong brand moat, and a diversified revenue stream (services, hardware, wearables).
Typical premium: Selling a 7-day, 5% OTM put generates $50-150 per contract depending on IV, approximately 0.5-1% weekly return.
Microsoft (MSFT)
ExcellentPrice Range
$350-$450
Typical IV
22-32%
Dividend Yield
~0.7%
Options Volume
500K+ daily
Why it's great: Cloud computing (Azure) provides stable, growing revenue. Exposure to AI trends via OpenAI partnership. Lower beta than other tech stocks.
Note: Requires larger capital ($35,000+ per put), but premiums scale proportionally. Excellent for accounts over $50K.
Alphabet/Google (GOOGL)
ExcellentPrice Range
$130-$170
Typical IV
25-35%
Dividend Yield
0% (no dividend)
Options Volume
300K+ daily
Why it's great: Dominant search engine + YouTube + Cloud + AI research. No dividend, but stock price appreciation potential is strong.
Best for: Traders who don't need dividend income and believe in long-term tech growth.
Other excellent tech picks: NVDA (higher volatility but strong AI story), AMD (semiconductors), AMZN (e-commerce + cloud), META (advertising + VR).
Top Dividend Stocks for Wheel Strategy
Dividend payers offer dual income streams: premium + dividends. They tend to be more stable during market downturns and attract long-term investors.
| Stock | Sector | Dividend Yield | Why It Works |
|---|---|---|---|
| Johnson & Johnson (JNJ) | Healthcare | ~3.0% | Recession-proof. Dividend aristocrat. Low volatility. |
| Coca-Cola (KO) | Consumer Staples | ~3.2% | Brand moat. Global reach. Stable cash flow. |
| Procter & Gamble (PG) | Consumer Staples | ~2.5% | Household essentials. Pricing power. Dividend king. |
| Verizon (VZ) | Telecom | ~6.5% | High yield. Infrastructure business. Sticky customers. |
| Pfizer (PFE) | Pharma | ~5.8% | Drug pipeline. High dividend. Lower price point (~$25-30). |
Dividend Strategy Tip
Track your ex-dividend dates! Selling puts before ex-dividend can mean getting assigned on the ex-date, and you'll receive the dividend. This effectively reduces your cost basis further. Use Njord Options to track dividend payments alongside your premium income.
ETFs: The Diversified Approach
ETFs eliminate single-stock risk while still offering excellent options premiums. They're perfect for conservative traders who want steady income without company-specific risks.
SPY
S&P 500 ETF
Tracks the top 500 US companies. Extremely liquid. Considered the "market itself."
QQQ
Nasdaq-100 ETF
Tech-heavy. Includes AAPL, MSFT, GOOGL, NVDA. Higher growth, higher volatility.
DIA
Dow Jones ETF
30 blue-chip stocks. Extremely stable. Lower premiums but rock-solid.
Why ETFs Excel for the Wheel
- No earnings risk: A bad report from one company doesn't tank your position
- Automatic rebalancing: ETFs adjust holdings—you don't have to
- Tax efficiency: No wash sale issues when rolling positions
- Sleep well at night: Market crashes still hurt, but you're diversified
Banking & Financial Stocks
Financial stocks offer a unique combination: moderate volatility, dividend income, and exposure to interest rate cycles. They're ideal for intermediate-term wheel traders.
JPMorgan Chase (JPM)
America's largest bank
- Price: ~$150-180
- Dividend yield: ~2.5%
- Why it works: Diversified revenue (investment banking, retail, credit cards), fortress balance sheet, proven management
- IV: 20-30% (spikes during banking crises, creating opportunities)
Bank of America (BAC)
Affordable price, high volume
- Price: ~$30-40
- Dividend yield: ~2.8%
- Why it works: Lower capital requirements ($3,000-4,000 per put), huge options volume, benefits from rising rates
- Best for: Smaller accounts wanting banking exposure
Goldman Sachs (GS)
Investment banking powerhouse
- Price: ~$400-500
- Dividend yield: ~2.0%
- Why it works: Higher premiums due to volatility, exposure to M&A cycles, institutional reputation
- Note: More volatile than JPM—only for experienced traders
Wells Fargo (WFC)
Turnaround story
- Price: ~$50-65
- Dividend yield: ~2.5%
- Why it works: Recovering from past scandals, federal restrictions being lifted, higher IV = higher premiums
- Risk: Regulatory uncertainty—do your own research
Banking Sector Considerations
Financial stocks are sensitive to interest rate changes and economic cycles. They tend to underperform in recessions but outperform when the economy is expanding. Consider mixing them with defensive sectors (healthcare, consumer staples) for balance.
Stocks to Avoid at All Costs
High premiums are tempting, but some stocks are premium traps. Avoid these categories to protect your capital:
Meme Stocks (AMC, GME, BBBY)
Why to avoid: Prices driven by social media hype, not fundamentals. Extreme volatility makes risk management impossible.
Example disaster: GameStop went from $40 to $350 to $20 in weeks. If you sold a $30 put thinking it was "safe," you'd be underwater for months or years.
Biotech Stocks (Small/Mid-Cap)
Why to avoid: Binary events (FDA approvals) can cause 50%+ moves overnight. Options pricing doesn't adequately reflect this risk.
Example: A biotech trading at $50 can drop to $5 if their lead drug fails trials. Your "safe" $40 put becomes a catastrophic loss.
Penny Stocks (Under $5)
Why to avoid: Bankruptcy risk. Poor liquidity. Wide bid-ask spreads. Often reverse split, wiping out shareholders.
Even if premiums look attractive on a percentage basis, the absolute dollar amounts are tiny. Not worth the risk.
Chinese ADRs (BABA, BIDU, NIO)
Why to avoid: Delisting risk. Political tensions between US and China. Unpredictable regulatory crackdowns from CCP.
Note: This doesn't mean these companies are bad—just that the wheel strategy requires predictability, and geopolitical risk makes them unsuitable.
SPACs and Recent IPOs
Why to avoid: No operating history. Often overvalued at IPO. Lockup expirations cause sharp drops.
Wait at least 12 months after IPO before considering a stock for the wheel. Let the hype die down and see if the business model actually works.
The Premium Trap
Beginners see a $200 premium on a meme stock put and think they're getting a deal. Experienced traders see a $200 premium and ask, "What does the market know that I don't?"
High premiums exist because the risk is genuinely high. Stick to boring, stable stocks. Your goal is consistent income, not lottery tickets.
How to Screen for Wheel-Worthy Stocks
Use this step-by-step process to build your personal wheel strategy watchlist:
Start with S&P 500 or Nasdaq-100
These indices contain pre-vetted, established companies. Download the list from S&P Global or your broker's screener.
Filter by Price Range
Set price between $20-$200 based on your account size:
- Account < $10K: Focus on $20-$50 stocks
- Account $10-50K: Focus on $50-$150 stocks
- Account > $50K: Any price up to $200
Check Options Liquidity
Open your broker's options chain. For each stock:
- Look at ATM (at-the-money) options expiring in 7 days
- Bid-ask spread should be < $0.10
- Open interest per strike > 500
- Verify weekly options are available (not just monthly)
Verify Implied Volatility
Check IV rank or IV percentile (most brokers show this). Target:
- IV between 15-40% (absolute)
- IV Rank between 20-80 (percentile of 52-week range)
- Avoid extremes: <10% IV (too low) or >80% IV (too risky)
Research Fundamentals
For each candidate, answer these questions:
- Is the company profitable? (Check last 4 quarters)
- Do I understand the business model?
- Would I hold this stock for 12+ months if assigned?
- Is management competent? (Read recent earnings calls)
- Any upcoming catalysts (earnings, product launches, legal issues)?
If you answer "no" or "unsure" to any question, skip the stock.
Build a Watchlist of 10-20 Stocks
Diversify across sectors:
- 3-5 tech stocks (AAPL, MSFT, GOOGL, NVDA, etc.)
- 2-3 financials (JPM, BAC, GS)
- 2-3 consumer staples (KO, PG, WMT)
- 2-3 healthcare (JNJ, UNH, PFE)
- 1-2 ETFs (SPY, QQQ)
Free Screening Tools
- Your broker's screener: Most platforms (TDA, Schwab, IBKR, Robinhood) have built-in screeners
- Barchart.com: Free options screener with IV data and volume filters
- MarketChameleon: Excellent for options liquidity analysis
- FinViz: Great for fundamental filters (P/E, market cap, sector)
3 Real Stock Analyses
Let's apply the 7-criteria framework to three different stocks across price ranges:
Example 1: Apple (AAPL) — $175
EXCELLENT CHOICE7-Criteria Checklist:
- Liquidity: 2M+ contracts daily
- IV: 23% (moderate, ideal)
- Fundamentals: Exceptional (brand moat)
- Dividend: 0.5% (modest but reliable)
- Price: $175 (requires $17,500 per put)
- Sector: Large-cap tech (stable)
- Weeklies: Available every Friday
Sample Trade:
Action: Sell 1x $165 put (6% OTM)
Expiration: 7 days
Premium collected: $85
Capital required: $16,500
Return: 0.51% for the week
Annualized: ~26% if maintained
Why AAPL is perfect:
Even if assigned at $165, you own a world-class company with a 1.5 trillion-dollar market cap. You can immediately sell covered calls for additional premium, comfortable holding long-term.
Example 2: Bank of America (BAC) — $35
GOOD CHOICE7-Criteria Checklist:
- Liquidity: 400K+ contracts daily
- IV: 28% (moderate-high)
- Fundamentals: Solid (major US bank)
- Dividend: 2.8% (attractive)
- Price: $35 (requires $3,500 per put)
- Sector: Financials (cyclical)
- Weeklies: Available
Sample Trade:
Action: Sell 1x $33 put (6% OTM)
Expiration: 7 days
Premium collected: $22
Capital required: $3,300
Return: 0.67% for the week
Annualized: ~35% if maintained
Why BAC works:
Low capital requirement makes it ideal for smaller accounts or diversification. The 2.8% dividend provides extra income while holding shares. Financials benefit when interest rates rise.
Example 3: Tesla (TSLA) — $250
PROCEED WITH CAUTION7-Criteria Checklist:
- Liquidity: 1M+ contracts daily ✓
- IV: 55-70% (very high) ⚠️
- Fundamentals: Polarizing (high valuation) ⚠️
- Dividend: 0% (no dividend) ✗
- Price: $250 (requires $25,000 per put)
- Sector: Volatile EV/Tech ⚠️
- Weeklies: Available ✓
Sample Trade:
Action: Sell 1x $230 put (8% OTM)
Expiration: 7 days
Premium collected: $320
Capital required: $23,000
Return: 1.39% for the week
Annualized: ~72% (looks amazing!)
Why TSLA is risky:
- • Extremely volatile—can drop 15% in a week
- • No dividend to cushion downside
- • High valuation makes it vulnerable to corrections
- • Elon Musk's tweets can cause 10% swings
- • That high premium exists for a reason: risk
Only trade TSLA if you're genuinely bullish long-term and can stomach 20-30% drawdowns.
Frequently Asked Questions
How many stocks should I include in my wheel portfolio?
Answer: Aim for 5-10 active positions across different sectors. This provides diversification without spreading your capital too thin. With a $25,000 account, focus on stocks in the $25-50 range so you can have 5+ positions. Larger accounts ($100K+) can handle 10-15 positions including some higher-priced stocks like MSFT or GOOGL.
Should I stick to stocks I already own?
Answer: Not necessarily. The wheel strategy is about stocks you want to own, not necessarily stocks you currently hold. If you own a stock that doesn't meet the 7 criteria (poor options liquidity, too volatile, no dividend), it's not a good wheel candidate even if you like it as a long-term hold. Separate your buy-and-hold portfolio from your wheel trading stocks.
Can I use the wheel on individual stocks or just ETFs?
Answer: Both work. ETFs (SPY, QQQ) offer lower risk and consistent premiums but smaller absolute returns. Individual stocks (AAPL, JPM, JNJ) offer higher premiums and potential upside but come with company-specific risks. Most traders use a mix: 30-40% ETFs for stability, 60-70% individual stocks for premium income.
What if a stock I like doesn't have weekly options?
Answer: You can still use monthly options, but the strategy becomes less flexible. Weekly options let you adjust faster, capitalize on short-term theta decay, and roll positions more frequently. If a stock only has monthlies, make sure you're extra comfortable holding it long-term since you'll be locked in for 30-45 days at a time.
Should I avoid all high-IV stocks?
Answer: Not all, but be selective. High IV (40-60%) can be great if the underlying stock is fundamentally solid and you're getting compensated for short-term uncertainty (like during earnings season). Avoid stratospheric IV (>80%) which usually signals serious problems: bankruptcy risk, regulatory issues, or pure speculation. The sweet spot is 20-40% IV on quality stocks.
How often should I review my stock watchlist?
Answer: Quarterly. Business fundamentals don't change overnight. Every 3 months, review your watchlist: Are earnings still strong? Has IV changed significantly? Any new risks (regulatory, competitive)? Remove stocks that no longer meet the criteria and add new candidates. Use Njord Options to track performance and identify which stocks are generating the best risk-adjusted returns.
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