Fundamental Fridays Ep. 18 — #NFLX Wheel Strategy
Before getting to the main event, Brian does some portfolio housekeeping on two older positions. The Apple covered call is sitting close to assignment on its 310 strike, which he says he’s fine with either way — getting called away means capturing the stock’s appreciation and freeing up capital to start a new position, which is the whole premise of the wheel strategy. The more interesting adjustment is on a separate, long-standing deep-in-the-money Apple call that’s up nearly 30% on a relative basis. Brian admits the position should probably have been rolled before Apple’s last earnings report, since the stock has since cooled off — a candid bit of hindsight rather than a victory lap. He rolls the position out from the 250 strike to the 280 strike and further out in time to December, capturing a $2,140 credit in the process while resetting the option’s delta back to around 80, which he treats as his rule of thumb for keeping a deep-ITM call acting like a reasonable stock surrogate rather than one that’s decayed into a coin flip.
The main topic is Netflix, where Brian’s account already owns 100 shares after a previous assignment and has ridden a strong rally on news that a prominent investor added the stock to his portfolio. Rather than just holding the shares, he layers on both sides of a wheel trade at once: selling a cash-secured put at the 78 strike and a covered call at the 86 strike in the same order, a combination sometimes called a combo or, more precisely here, a short strangle against stock. Getting to his target of roughly 4% premium on the put takes some negotiating with the option chain — the 35-day expiration only offers about 3.6%, so he extends out to 42 days to clear the 4% threshold, while the call side only needs to hit 1-2% since the stock’s own appreciation covers the rest of that leg’s return if it gets called away.
Brian uses the setup to walk through the actual math behind wheel-strategy thinking: the goal isn’t necessarily to get assigned the stock at a discount, it’s to make sure the premium collected is worth the risk even if the stock runs away and the put simply expires worthless. He runs the numbers out to their logical extreme — sell a put every 30-some days, collect roughly 4-5% each time, and even without ever owning the stock, that compounds to a meaningful annualized return, which is why he’s willing to walk away from a trade that pays only 1-2% rather than settle for a lower, safer strike.
The episode closes with a shorter Q&A-style wrap-up and a reminder that this Fundamental Fridays format exists specifically to walk through the basics step by step, with the more advanced trades reserved for the Monday and Wednesday Options Guy TV sessions. Between the Apple roll and the Netflix wheel trade, it’s a good showcase of two very different kinds of position management: tightening up a winner that’s run too far, and systematically getting paid to wait on a stock you’re happy to own either way.
