The Wheel Strategy Explained Using McDonald’s Stock

During their recent episode of the Value Options Letter and Acquirers Podcast, Travis and Carlisle discussed Get Paid While You Wait. Here’s an excerpt from the episode:

[Tim] I mean, I’m optimistic on it because I think the valuation is compelling. I think that the brands there and with people paying so much for gasoline right now, I think the lower cost menu offerings that they have are attractive to consumers that are looking to save. So I’m optimistic long-term and short-term.

But I think using the options is an effective way because don’t forget when we were selling the 260 puts, the stock’s at, it was at like 270, 267. So instead of taking that full hit, and of course the 52-week high is well over 300, instead of taking that full hit, you’re down a couple bucks on your 100 shares and then you have the options capabilities to sell covered calls from there. So I feel like the volatility was attractive.

We’re happy collecting dividends if we own the stock long enough and we think that there’s enough upside. There’s plenty of premium available on the calls. So it’s a dynamic strategy where we know what we own, we know why we own it, and we know at what prices we’re comfortable buying or selling.

And so that plays to our advantage. We have the knowledge behind us. It’s not just kind of at the fly, off the cuff.

You know, it’s an educated strategy.