Okay, so everyone loves the wheel

strategy when everything is going up,

but what do you actually do when the

wheel strategy is not working your favor

when stocks are dropping? Because

eventually they will and we will

experience volatility as we've seen in

the market over and over again. And

that's just part of the game. So in this

video, I want to show you how to manage

the wheel strategy, how to use it, what

to do when the position moves against

you because honestly how you handle this

is the difference between a small dip

and a real problem within your

portfolio. So let's get into it. Now,

let's discuss how to properly manage the

wheel strategy based on various

scenarios. My Discord community has

asked me before what to do if the stock

or SPY in this example gets very low,

much lower than your cost basis. This

part gets complicated and nobody covers

this. But here's scenario number one.

Let's say that the stock goes down 10%.

So for example, you sell a $100 put

option. It goes down to 90. Well, this

is actually not that hard of a position.

In this example, because the stock is

now $90 and your average cost is 100,

you can actually still try to sell 100

covered call. Now, you likely won't be

able to do that in one given week

because in one week that's going to have

no premium whatsoever because option

traders understand that since the stock

is at 90, $100 is 11% away. Therefore,

the premium will be very tiny. So what

you will have to do is you'll have to

sell covered calls that are two, three,

or four weeks out at $100 strike price.

Then, you'll still be able to collect

one or 2% premium while not really

losing on the stock itself when it does

recover. Now, in scenario number two,

let's say that the stock goes down 20%.

This would be very insane and super

unlikely for SPY. I mean, just downright

nearly impossible for SPY to fall 20% in

a week or two. So, you know, I do stick

to weekly trading. So for it to fall

20%, really that's probably not going to

happen, but let's just say it's a

different stock. So, I know a lot of

people like, you know, Tesla. You know,

there's a bunch of stocks out there, and

if the stock does end up going down 20%,

let's go back to the example of a stock

being worth 100, which is your put. It

goes down to 80. Unfortunately, what

you're going to have to do is wait and

hope that the stock will recover. And

hopefully, when you're selling puts and

doing the wheel strategy, hopefully

you're picking stocks that are good to

begin with. Because if you're not, and

the stock falls down 20%, you start

scratching your head, "Why am I owning

this thing?" Well, you have to ask

yourself, "Why did you get into that

position to begin with?" Okay? So, if a

stock goes down 20% and it's very far

away from your cost basis, that's not

necessarily that bad of a problem if you

like the stock. What you're going to

have to do is, number one, you'll

probably have to wait. Or, number two,

now this is very interesting. Say that

the stock goes down to 80. You can try

to salvage and create some income by

selling a 90 covered call. So, if you

sell a 90 covered call, that's not ideal

because if were to recover, you would

lose some money on this position as a

whole, and your wheel would not be

profitable. But, that's the price that

you pay when you're doing the wheel

strategy on a riskier stock. So, if

you're doing it on riskier stocks, and

it does end up falling 20%, what you

probably have to do is you probably have

to sell around the 90 strike price.

However, it doesn't mean that you have

to get rid of your shares at 90. What

you can also do, say that you sell a 100

put, goes down to 80, you get assigned,

obviously, and you start doing 90

covered calls. Say at expiration, or

basically a day or two before, somewhere

in that near to expiration time period,

say that the stock goes up to $91, and

you're upset. You're basically saying,

"Hey, I don't want to lose these shares

yet because my cost basis is 100. I did

sell a 90 covered call, let's say it was

for a dollar." So, technically, you're

breaking even at 91, but say you don't

want to get rid of the shares. What you

can do then is actually roll that

covered call higher. So, you can take

that 90 covered call and close that 90

and then open up a 95. And in most

cases, if you do that far out enough,

you can still collect a credit or at

least break even. But even if you break

even, now at least you don't have to get

rid of the stock at 90, you can get rid

of it at 95. Now, let's talk about the

call side. If a call goes into the

money, what will happen is you will get

exercised and lose your shares in the

wheel strategy, right? So, you first of

all can get assigned on the puts, you'd

have to buy stock, but if you get

assigned on the calls, you have to sell

stock. So, say you don't want to sell

your shares, what you can do again is

roll and close out that position. What

is likely to happen most of the time is

that someone will actually end up

selling covered calls that are out of

the money and it's perfectly fine

because as long as it's out of the

money, you're going to be collecting

premium. If it's in the money, then

you're going to lose your stock if you

wait until Friday expiration or you can

roll it out higher. There's two things

that you can basically do. If you get

assigned, so be it. If it's above your

cost basis, you're probably happy. If

you don't want to lose your shares and

you are at a gain, that's okay, too.

Again, you can roll. Now, one important

thing that I just want to say, with the

wheel strategy, something that people do

not realize is no matter which way in

which direction it's going, you can

still dollar cost average and sell more

put options or sell more covered calls

by buying more shares, especially if it

is below your strike price. Especially

if it is below your cost basis. So, for

example, let's say that a stock is at

100, okay? You end up selling a 90 put

option, okay? It goes down to 95. That

doesn't mean that you can't sell more

put options at 90. Let's say it goes

down to 85. You can still sell more put

options at 80. So, you can continuously

sell more put options the entire life

cycle of running the wheel strategy and

that would be dollar cost averaging the

wheel strategy. There's nothing wrong

with that. The only issue is say you

have $30,000 and you put $15,000 into

Apple. Well, you can't really dollar

cost more into Apple because it's

already 50% of your portfolio. So, when

you are dollar-cost-averaging into the

wheel strategy, you want to make sure

that you have 5, 10, 15% of your entire

money in a single position. Therefore,

if it does go down, you can do more of

the wheel strategy on the same stock

dollar-cost-averaging but not exceeding

like 30 or 40% of your portfolio. The

less of your portfolio you have in one

single position, the better. The more

diversified you are. All right, guys,

let's jump into my portfolio right now.

I want to show you Palantir because

Palantir has obviously gone up a lot,

but for a very significant amount of

time Palantir was not doing too well and

I am running the wheel strategy on

Palantir over and over every week and

every month in my Discord community. I

want to show you how I'm handling this

stock. So, it's currently trading for

$158 per share. I have a lot of

Palantir. I have $412,000

worth of shares and I currently have a

160 sell put. This 160 sell put, it is

in a very interesting position because

I've been holding it for a long time and

Palantir is under 160. What's really

interesting is Palantir was well under

160 for a very long time and I've been

holding this 160 put. Let's actually go

into it. Let me see kind of when I

opened this up because I want to

transparently show you what I've kind of

been going through in terms of the

management process. So, let's go here

into when I opened this. I opened this

on March 11th, which is a long time ago

as I'm making this in August, you know,

5th essentially. So, it's August 5th,

March 11th, so April, May, June, July,

August. It's been 5 months. And when I

sold the put option here, I've been

pretty deep in the money for a while.

You can see here in the last 3 months, I

have been well under, I mean, you can

see how expensive it would be need buy

back this sell put position. So,

whatever you sell a put position, which

is essentially how you start the wheel

strategy, if it goes into the money,

it's going to be very expensive to buy

back, right? Because it's in the money,

it's high chance of getting assigned,

and if you want to close out that

position, get out of it, it's going to

be expensive. So, you can see here how

Palantir this put option was so in the

money at one point on June 25th, it was

worth $53. If I had to buy it back, it

would cost me $53 per contract, and

yeah, I have one contract here, which is

this is fine, right? But, you can see,

let me go to the stock cuz I want to

show you what happened and how I didn't

panic. I didn't really close out this

position, and as Palantir was well below

160, like literally the entire time.

Let's go to year-to-date return. Let's

go to March. Okay, so March was all the

way back here. You can see right around

here, I sold a put option that was

actually in the money. And the reason

why I did that is because I wanted to

collect a lot of premium, and I actually

wanted to own more Palantir, and I only

did one contract as my dollar cost

averaging strategy, which is really

interesting. I'm going to teach you

something real quick. If you sell put

options and you get assigned in small

quantities, you're basically dollar cost

averaging. You're buying more of the

stock, and you're getting paid to buy

more of the stock. So, I'm just DCA-ing,

really. But yeah, you can see here how

this entire time, literally from March

until August, Palantir was below this

level, right? It did pop up at 160

exactly, pretty much. That's funny, on

June. And it's been below that the whole

entire time, okay? Yet, I didn't close

out the put option, okay? Because as

part of the wheel strategy, especially

when I'm running the slower wheel

strategy, this is an interesting video

because I'm basically running the slower

wheel strategy right now on Palantir. I

have multiple Palantir positions. I have

stock, I have covered calls, I have sold

puts, wheel strategy. You know, I've

started running the poor man's covered

call strategy. I'm doing all the option

strategies that I have in my toolkit on

Palantir. That's because this the stock

has amazing implied volatility, and I've

been in the stock since IPO. Alex Karp

is someone that I think is a great CEO.

He went to my high school, da da da,

whatever. Um, that's not important.

Look, what I'm looking at here though

the entire time was difficult. Palantir

pulled up, and I'm still not doing

anything. My goal with Palantir is I

think this is a $170 to $180 stock and

it basically bridged that entire gap in

in like just one earnings period. Okay,

they reported amazing earnings and good

guidance which was even more important.

And now with my wheel strategy

essentially, I'm still not doing

anything on the sell put side. On the

sell put side, I am sitting tight. So, I

guess this video the lesson here is that

whenever you sell a put option, your

goal is assignment and whenever you go

into the money, don't panic. Don't take

too much action. That's going to cost

you a ton of money. Often times when I'm

doing my one-on-one coaching, it's not

that I have revolutionary new ideas. I

have some of those. Sometimes I'll do

kind of more interesting strategies and

I'll go over mindset and I'll go over,

you know, different stocks. But to be

honest, a lot of the strategies I teach

you guys here for free on this channel.

I have a 6-hour course which talks about

almost every strategy that I know. So,

the difference really isn't knowing

another strategy. It's really how to

handle, how to manage, how to go through

some of the more difficult times. And if

you sell a stock or you try to buy it

back when it's down, that's a mistake.

And as we see right here, lots of

volatility in the market and um whenever

the market comes back up, you end up

reaping rewards for your patience. So,

stay patient my friends. If you like

this video, then make sure to subscribe.

It definitely helps out the channel a

lot and then I know to make more videos

just like this and I'll catch you in the

next one.