Video teaches a low-risk options strategy suitable for beginner investors and traders.
Presenter: Seth Freudberg, head of options trading at S&B Capital (Manhattan).
Strategy demonstrated: cash-secured puts and covered calls combined into a "wheel" campaign.
Example used: Chevron (CVX) over a 12-month campaign in 2023–2024.
Outcome: option strategy produced higher returns and more cash flow than simply owning shares.
Action Items
(none – no dated/owned items provided)
Wheel Strategy Overview
Sell cash-secured puts at ~20 Delta repeatedly until assigned shares.
If assigned, sell covered calls at the strike you were assigned.
Repeat cycle: after shares are called away, sell puts again and restart the wheel.
Rationale: 20 Delta puts have ~80% chance to expire worthless, generating regular income.
Example Campaign: CVX (Chevron)
Initial stock price: $158.69 on July expiration day.
Step 1: Sell August 20 Delta put (150 strike, Delta ≈ 19.94%) for $1.30 premium.
Requires $15,000 cash secured per contract (covering $15,000 strike*100).
Collected $130 premium (100 multiplier).
Monthly process: sell closest-to-20-Delta put each month; keep premium if put expires worthless.
November: sold 155 put, stock closed at ~$144.46, assigned shares at $155.
Once assigned: sell covered calls at the same strike (155) to generate income.
March: sold 155 call for $3.45; stock closed slightly above 155 and shares were called away.
Returned to selling puts (April sold 150 put at $1.37) and continued the cycle.
Total option premium collected over 12 months: $1,659.
Cash Flow, Capital, And Risks
Each options contract controls 100 shares; premiums must be multiplied by 100 for cash received.
Cash-secured requirement example: to sell a 150 put you need ~$15,000 available per contract.
Assignment risk: if stock closes below the put strike at expiration, you are obligated to buy shares at the strike.
Managing assignments: once assigned, you can hold shares or sell covered calls to offset cost and generate income.
Dividend consideration: full-time share owners receive all dividends; wheel strategy owners receive dividends only when assigned and holding shares across an ex-dividend date.
Opportunity cost: while not holding shares, funds can be invested elsewhere (e.g., money market >5%), increasing effective return.
Performance Comparison
Owning CVX shares for 12 months: ~4.25% return (plus dividends).
Wheel/options campaign: >11% return from options premiums plus any dividends when assigned.
Effective return is higher because capital is not tied to shares as often and can earn money market returns when not assigned.
Practical Implementation Notes
Use broker options chain and the Delta column to find ~20 Delta puts.
Multiply option premium by 100 to compute cash received per contract.
Maintain sufficient cash to meet assignment obligations.
When assigned, consider selling covered calls at the assignment strike to potentially break even and collect further premium.
Track a scorecard monthly to monitor premiums collected and assignments.
Decisions
Adopt the wheel strategy (cash-secured puts → covered calls) as a repeatable income-generating approach for stocks you are comfortable owning.
Open Questions
What broker margin or cash requirements apply specifically to my account?
How do taxes on option premium and assigned share sales affect net returns?
How should position size be sized relative to total portfolio risk tolerance?