Let’s be honest—once you’ve conquered the fundamentals of portfolio construction and asset allocation, the real challenge begins. You know what you want: stability AND better returns. The problem? That combination feels like chasing unicorns in today’s market.
One tool that can be particularly useful? Options!!
In this article, I will discuss the best option strategy for long-term, steady income so you can build wealth smartly over time.
If you ask me, this is the best strategy because it’s advanced yet easy to learn. And it’s designed for controlled portfolio outcomes to tackle systematic wealth-building.
It works for dedicated options investors looking to add consistent income, protect their positions, and improve total returns with reduced risk levels. Now let me explain how!
Why Invest in Options?
Before diving into the details, let’s understand why options make sense for long-term investors in today’s markets.
In these uncertain times, with increasing market noise and inconsistent equity returns, traditional income-generating tools like bonds or dividend stocks can feel limiting. Options, when used strategically, offer three distinct advantages:
- Customizable Risk Profiles: Modify strategies to match your exact risk tolerance.
- Consistent Cash Flow: Earn premium income regardless of short-term market direction.
- Portfolio Protection: Hedge downside risks without liquidating core holdings.
For investors who understand the market but crave a sharper edge, options can be the perfect complement to an already robust investment portfolio.
Here’s an example:
Imagine you’re an investor with a diversified portfolio of stocks, including long-term holdings like Amazon (AMZN) and Microsoft (MSFT).
While you’re happy with your positions, the market has been volatile lately. Traditional tools like bonds or dividend stocks are giving you modest returns, but you’re looking for ways to boost your portfolio’s yield without taking on excessive risk.
Here’s where options come in. By selling cash-secured puts and covered calls, you can enhance your portfolio’s income potential.
For instance, if you sell a cash-secured put on Amazon at a $3,000 strike price, you could earn a $100 premium. Whether or not Amazon’s price hits the $3,000 mark, you’ve generated consistent income, and you still maintain the potential to buy Amazon at a favorable price if it dips.
| Free Resources: Understand options in historical context and access many more valuable nuggets of actionable investing information via my free options introductory course. |
#1 The Best Options Strategy: The Wheel Strategy
The ideal investment strategy isn’t flashy. It’s not built on weekly lottery-ticket trades. Instead, it’s a methodical approach that combines two foundational options investment techniques: cash-secured puts and covered calls. Together, they form what’s known as The Wheel Strategy.
It’s easy and designed for consistent premium generation. This gives you control over how and when you acquire or sell a stock.
Step 1: Start with Cash-Secured Puts
Objective: Get paid to wait for a great entry point.
Imagine you’re getting started with cash-secured puts. If the stock stays above the strike price, the put expires worthless, and you keep the premium. If the stock drops below the strike, you buy it at a discount and still get to keep the premium!
Why this works:
- It generates regular income.
- It helps you buy quality assets at better valuations.
- You’re always operating from a position of control—not reacting to market noise
Example:
Let’s say Apple (AAPL) is trading at $170. You sell a cash-secured put with a $165 strike and earn a $2 premium per share. That’s $200 income for one contract (100 shares).
If AAPL stays above $165, you keep the $200 easy income
If AAPL drops below $165, you will be assigned shares at $165, but you still get to keep the $200 premium. You’ve bought Apple at a discount while generating premium income.
Now, you own the stock and sell a covered call to earn more premium.
Repeat the cycle. That’s the Wheel Strategy— steady, repeatable income from quality stocks.
Step 2: Transition to Covered Calls
Objective: Generate income while holding stock.
Once you’ve been assigned shares through your cash-secured put, or if you already hold a stock, the next step is writing covered calls. You sell a call option at a strike price above your cost basis.
If the stock stays below the strike, you keep it and sell another call next month. If it rises above, your shares are called away at a profit—and you still keep the premium!
Example 1:
Let’s say you’ve been assigned shares of Apple (AAPL) at $165. Now, you sell a covered call at $175 for a premium of $3 per share.
If AAPL stays below $175, you keep the shares and the $300 premium.
If AAPL rises above $175, your shares are sold at a profit, and you still keep the $300 premium.
Example 2:
Imagine that you own 100 shares of Microsoft (MSFT), currently trading at $420. You sell a covered call with a $430 strike and collect a premium of $3 per share. That’s $300 income upfront!
If MSFT stays below $430, you keep the shares and the $300–easy income.
If MSFT rises above $430, your shares are sold at $430, and you still keep the $300, locking in gains.
It’s a pretty smooth cycle: Earn premium → acquire stock → earn more premium → sell at a gain → repeat.
#2 Why The Wheel Strategy Wins Over Time
Let’s get one thing clear: no strategy is risk-free. But what makes the Wheel strategy the best option strategy in the long run is its built-in discipline and consistent logic.
Example:
Let’s look at a scenario where you have $50,000 allocated to the Wheel Strategy.
You start by selling cash-secured puts on blue-chip stocks like Tesla (TSLA), Apple (AAPL), and Amazon (AMZN). And over the course of a year, you generate around $1,500 per month in premium income, totaling $18,000 annually.
If the stock prices drop below the strike prices and you buy shares, you own them at a discount while still pocketing the premium income.
Key Benefits:
- It rewards patience: You’re not chasing trades, you’re waiting for opportunities.
- It enforces a rules-based approach: Emotions are minimized by clear entry/exit points.
- It compounds income: Premiums collected monthly can be reinvested or used to offset market volatility.
Over time, this strategy provides multiple layers of return: from premiums, from capital appreciation, and potential tax advantages (depending on how long you hold positions).
#3 Avoiding Common Option Investing Errors
Many investors shy away from options because of concerns about complexity or horror stories of outsized losses. The truth? These risks often stem from misused leverage or undisciplined speculation.
With the Wheel strategy, I avoid:
- Naked options: Every position is backed by cash or stock.
- Excessive leverage: No margin requirements for the core trades.
- Chasing volatility: The focus is on consistent returns, not short-term thrills.
And most importantly, I build emotional discipline into the process by following a system, not a gut feeling.
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#Bonus Tip: Emotional Discipline While Executing The Best Option Strategy
Even the best option strategy falls short if the investor isn’t equipped emotionally. One of the most underrated benefits of the Wheel strategy is the framework it provides for decision-making. By defining actions in advance, you tackle the “what should I do now?” anxiety that plagues so many traders.
Example:
During a market pullback, let’s say you own shares of Tesla (TSLA), which drop from $900 to $800. It can be tempting to panic and sell out of fear, but with the Wheel strategy, you remain calm because you have a clear plan.
Since you’ve sold a covered call at a $950 strike price, you know that even if Tesla rises again, you’ll still earn premium income and possibly make a profit on the stock.
This structured approach helps you:
- Stay calm during pullbacks
- Avoid revenge trades
- Take profits without second-guessing
- Accept small losses without spiraling
In short, you trade with confidence, not fear.
#4 Advanced Tips to Make the Most of The Wheel Strategy
As you gain more experience with the Wheel strategy, consider:
- Using delta-based selection: Choose strike prices with a delta between 0.25–0.40 for a balance of income and probability.
Example:
If you sell a cash-secured put with a delta of 0.30 on a stock like Nvidia (NVDA) with a strike price of $400, the premium you collect might be higher than if you picked a more conservative strike at $380. This increased delta offers a better income-to-risk balance. - Targeting high IV stocks: Stocks with higher implied volatility (IV) often offer richer premiums, but be sure to manage your risk carefully.
Example:
If you target stocks like GameStop (GME) or AMC, which experience spikes in IV, you can capture higher premiums for your options, though these stocks can be more volatile. - Rolling options effectively: Learn when to roll out, roll up/down, or let options expire for optimal results.
Example:
If your put option is approaching expiry and the stock price is close to the strike price, rolling it to a later date or a higher strike can allow you to collect additional premiums while maintaining your position.
Final Thoughts
It’s Time to Trade Smarter — The best option strategy isn’t a secret—it’s a system. The Wheel strategy, with its combination of cash-secured puts and covered calls, offers a trustworthy framework for generating premium income month after month.
It turns volatility into opportunity and complexity into clarity. For investors seeking a disciplined path to consistent returns, this approach delivers on both performance and peace of mind.
Ready to Put This Strategy to Work?
Once you’ve developed enough confidence and are comfortable with my teaching style, you can enroll in my Advanced Bundle Course to move from strategy awareness to execution.
Your future income stream is waiting—let’s build it. Feel free to reach out or leave a comment about your strategy. I’d love to hear from you!