Article
Options Trading Strategy — The Wheel, Safely
A conservative, cash-secured Wheel Strategy for weekly income. Target ~1% per week using cash-secured puts and covered calls with strict risk, liquidity, and capital rules.
Table of Contents
Core Objective
Generate consistent weekly income from options by targeting approximately 1% return per week on capital, using low-stress, cash-secured trades that can profit in up, sideways, or mildly down markets. The system prioritizes resilience and can operate through multi-year bear markets by owning only what you wouldn’t mind holding and continually selling premium.
Strategy Framework
Cash-Secured Puts (CSPs)
- Sell puts on tickers you’re comfortable owning long-term.
- Strike: 1–5% below current price for cushion.
- Expiration: 7 days (weekly).
- Premium target: ≥ 1% of strike.
- Collateral: fully cash-secured (no margin or leverage).
Covered Calls (CCs) on Assignment
- If assigned shares, sell covered calls to collect weekly income and exit profitably.
- Strike: at or slightly above breakeven.
- Repeat until called away; then return to selling puts.
Tip: Track both CSPs and CCs in Njord Options to verify that your weekly income is averaging ~1% across the portfolio.
Capital Management
- Never use margin or leverage.
- Every trade is fully collateralized.
- Prefer under $1,000 collateral per contract when possible.
- Aim for up to ~6 trades per week for diversification and focus.
Trade Criteria
| Parameter | Target |
|---|---|
| Strike distance | 1–5% below current price |
| Expiration | 7 days (weekly) |
| Premium yield | ≥ 1% of strike |
| Underlying price | Preferably under $50 |
| Volume & OI | High option volume and open interest |
| Liquidity | Tight bid/ask spreads |
| Risk filter | Avoid speculative or meme stocks |
Current Tradeable Watchlist
Focus on underlying you wouldn’t mind owning if assigned. Examples:
- RIOT
- KSS
- SOFI
- LYFT
These are examples, not recommendations. Always apply the criteria above.
Rules & Discipline
- Never buy options — only sell premium.
- Never use margin or leverage.
- Never own stock unless assigned.
- If assigned, immediately sell a covered call.
- Prioritize liquidity, volatility, and downside protection.
- Keep it simple, safe, and scalable.
Weekly Process
- Monday: Identify 3–5 CSP opportunities that meet all criteria.
- If assigned: Write covered calls at or slightly above breakeven.
- Goal: Achieve ~1% weekly income across the portfolio.
Use the Premium Calculator to project weekly income and track results with Njord Options.
Market Adjustments
- If volatility/direction is uncertain, go deeper OTM (4–5%) for protection.
- Favor liquid, lower-priced tickers near strong support zones.
- Focus on steady income, not prediction.
Philosophy
“We’re here to collect rent, not gamble.”
Provide liquidity, manage risk, and get paid weekly for patience. By systematically selling option premium with defined risk and adequate collateral, you become the house — collecting rent from speculation.
Frequently Asked Questions
Is 1% per week always possible?
No — markets vary. The target is an average across weeks. When volatility is lower, you may accept 0.5–0.8% with deeper OTM strikes for safety. When volatility rises, 1%+ is common.
What if I’m assigned?
Treat assignment as part of the plan — immediately sell a covered call at or slightly above breakeven and continue collecting rent. If the stock recovers, you exit profitably; if not, you continue to reduce basis.
Why avoid margin?
Margin magnifies losses and turns a conservative income system into a leveraged bet. This approach is designed for durability across market cycles.
Track your Wheel Strategy with precision.
Create a free account to log trades, calculate true cost basis with FIFO lots, and see weekly premium performance across your portfolio.