Stock selection is the most underrated decision in the wheel strategy. You can have perfect strike selection, textbook roll management, and disciplined position sizing — and still lose money consistently if you're wheeling the wrong stocks. The premium is only part of the equation. The stock you're selling puts on needs to be one you'd actually be okay owning through a significant drawdown.
Here are the five criteria that consistently produce good wheel candidates, plus a sector-by-sector breakdown of tickers worth considering right now.
What Makes a Stock Good for the Wheel Strategy?
Criteria 1: IV Rank Between 25-50%
IV Rank tells you where current implied volatility sits relative to its range over the past year. Below 25% means premiums are thin — you're being paid too little for the risk you're taking on. Above 50% often means something has gone wrong with the company or the market environment, and you're being tempted by fat premiums that come with correspondingly fat assignment risk. The 25-50% sweet spot gives you decent premium without taking on positions in companies that are clearly in trouble.
Criteria 2: High Options Chain Liquidity
Look for bid-ask spreads under $0.10 on at-the-money options and daily volume of at least 1,000 contracts. Illiquid options chains are profit killers — every fill eats into your margin, and rolling in or out of a position on your timeline becomes difficult. Stick to the top 100-150 S&P 500 companies by market cap and you'll almost never have a liquidity problem.
Criteria 3: A Stock Price Your Account Can Support
Every CSP requires the full strike × 100 in buying power. A $400 stock means $40,000 tied up in a single position. For most individual traders, stocks in the $20-$150 range allow better diversification across multiple campaigns without overconcentrating capital. Starting smaller lets you run 3-5 campaigns simultaneously, which dramatically smooths your returns compared to running one large position.
Criteria 4: Fundamentals You Believe In
This criteria is non-negotiable. You will get assigned eventually. The question is whether you're psychologically and financially prepared to hold those shares for 3-12 months while selling covered calls below your cost basis. If the company's business deteriorates while you're holding, no amount of call premium will rescue the campaign. Check the latest 10-K and 10-Q analysis on MoneySense.ai before selling the first put.
Criteria 5: Dividend Yield as a Bonus Income Stream
Dividend-paying stocks give you a third income layer on top of put premiums and covered call premiums. Every dividend received further reduces your ACB. Companies like KO, PG, or JPM pay quarterly dividends that add $0.40-$1.50/share annually — real money over the life of a multi-year wheel campaign on a stock that pays consistently.
Top Wheel Candidates by Sector Right Now
| Sector | Top Tickers | Why They Work |
|---|---|---|
| Technology | AAPL, MSFT, AMD, INTC | Deep liquidity, consistent IV, widely held |
| Financials | JPM, BAC, SCHW, C | Good premiums, quarterly dividends, sector stability |
| Consumer Staples | KO, PEP, MCD, PG | Stable prices, strong dividends, moderate IV |
| Energy | XOM, CVX, COP | Elevated IV during oil volatility, strong dividends |
| Industrials | CAT, DE, HON | Cyclical IV spikes create opportunity windows |
Which Stocks Should You Avoid?
Avoid meme stocks, small biotech companies with binary FDA event risk, recent IPOs with no earnings history, and any stock where you'd panic-sell after a 30% drawdown. The wheel strategy's defensive mechanism is the ability to hold assigned shares calmly while selling calls — that only works if you genuinely believe in the underlying business.