How the Wheel Strategy Generates Passive Income From Stocks

During their recent episode of the Value Options Letter and Acquirers Podcast, Travis and Carlisle discussed How the Wheel Strategy Generates Passive Income From Stocks. Here’s an excerpt from the episode:

[Tim] Do you sell a put and you collect a premium upfront like Amazon? Okay. So we sold a $250 put.

We collected, I think, $308. It was a short-term option. I don’t even remember how many days, I won’t guess, but probably less than 30 or somewhere around there.

So I guess I will guess. But we got exercised. And then, so we owned it at a break-even of around 247-ish.

And then we sold calls. I believe we sold at 260, 265, something like that. Once again, relatively short-term.

So you’re basically manufacturing a dividend into the stock. You have decent upside potential. If you think Amazon’s going to double, you don’t want to sell the call there.

I like Amazon a lot. We actually have multiple Amazon positions on the website. So that’s not the only one, but that’s a way that you can kind of turn over that money and manufacture returns with that.

So that’s the wheel though. It’s just a multi-pronged process. And you can also do it with covered calls.

So we also had a Blue Owl Capital. We bought the stock and sold a call. The call expired worthless.

And so now we’re just selling another call on it. And that stock also pays like a 9% dividend. So yeah, so it’s an active process.