The easiest way to fail at the wheel strategy is to chase high premiums on meme companies or biotech stocks that are fundamentally flawed. If you wheel a stock that goes bankrupt, you lose 100% of your capital regardless of the options premiums you generated.
Instead, the best stocks for the wheel strategy possess the following traits:
- Strong Balance Sheet: You must be comfortable owning the company long-term.
- Moderate to High Implied Volatility (IV): The stock must have enough expected price movement to generate a high enough option premium to make the lockup of capital worthwhile.
- Liquidity: Options should trade frequently with narrow bid-ask spreads and high open interest.
- Price Range You Can Afford: Since you need to secure 100 shares' worth of capital, a $500 stock requires $50,000 per contract.
Popular examples include ETFs like SPY and QQQ, and individual stocks like AAPL, MSFT, NVDA, AMD, and GOOGL — all of which have active options markets with favorable IV levels.
best stocks for wheel strategyhigh IV stocks optionswheel strategy stock screenerwhat stocks to wheelwheel strategy ETF