Is it possible to use the Options Wheel Strategy to double returns in retirement accounts? In this blog post and the associated video, I share my November results of using the Options Wheel Strategy in my Roth IRA. I completed ten trades. I rolled seven vertical put credit spreads and two covered calls. I had one new cash-secured put. I spent little time and was able to rack up $829 of premiums.
On a monthly basis, this is more than double what I earn in options premium monthly in my brokerage account. At the start of November, my Roth account was worth $50,608. Using the $829 in premiums my return was 1.6% for the month or 19.2% per year. I typically earn about half a percent monthly in my brokerage. I was able to earn a better return because I do not need to worry about profits and associated taxes in a Roth retirement account. I felt like I could take a bit more risk.
Seven of the ten options positions had expirations on November 19th. I rolled all seven the second week of November to the same expiration date of December 17th. I made good premium with all of them and spent little time on the process. I completed the next three trades the next week and rolled two and initiated a new position in Ford. I was done trading on November 17th.
Now you might be wondering how I was able to write ten positions in a small account. Well, I did set up this account to be level 2 options trading on Schwab. This allowed me to use margin and limit the required funds for each contract. For example, for a CSCO Vertical Put Credit Spread, I sold a contract short for $50 and purchased the outer arm $45 contract both with the same expiration. In this case, I needed less than $500 of cash to make the trade. The equation is (50-45) *one hundred – collected premium.
This does put me at some risk if the market crashes and everything is underwater at the same time. To avoid this, I must be sure that the expirations are laddered and that I have a way of generating more cash. If this did happen, I would have to sell enough shares in IJH to have enough cash. However, in most cases, I can sell the contracts at a loss to get out of the in-the-money positions.
With the recent market downturn, several of my positions are in the money. In the video share my plans on how I want to manage the at-risk trades. Join me in my journey to learn the best way to use the options wheel strategy to double returns in retirement accounts. You might be surprised to learn that you can retire much sooner than you ever thought possible.
Thanks for tuning in and happy trading!
