Multi-Strat Options Trading: Premium Selling and the Wheel Strategy

Vocabulary terms covering core options concepts, technical indicators, and execution rules from the Multi-Strat Options Trading introductory lecture.

Legging In

A method of gradually establishing a position in a stock the trader wants to own by repeatedly selling puts to collect premium and reduce the net cost basis before taking assignment.

Four Phases of the Wheel Strategy

Kevin's systematic option strategy consisting of: 1) selling cash-secured puts and collecting premium, 2) delaying assignment by rolling out another month if wrong, 3) accepting assignment of the shares, and 4) selling covered calls while rolling them up and out.

Rolling (Options)

Closing an existing option contract prior to expiration and immediately opening a new contract at a later expiration date (and potentially a different strike) to extend duration without requiring extra margin.

Rolling for a Credit

The non-negotiable rule requiring that whenever an option contract is rolled to a subsequent expiration, the transaction must yield additional net cash premium rather than incurring a debit.

Kevin's Open Interest Rule

A liquidity filtering rule requiring an option contract to have at least $100$ open interest before entering a trade to prevent being unable to exit.

Money Flow (Accumulation Distribution)

A technical indicator on ThinkorSwim calculated from the candlestick high, low, and close prices across multiple time frames to track institutional capital entering or leaving a stock.

Commodity Channel Index (CCI)

A technical indicator characterized as functioning similarly to a Relative Strength Index (RSI), but engineered to account for market volatility.

Down Channels

Descending technical chart corridors defended by institutional computer algorithms on the way down until the channel is broken.

Earnings Drift

A sustained post-earnings momentum move observed in unusual option activity (UOA) plays where the underlying price continues to run well beyond the expected initial reaction.

Cash-Secured Put

A short put position requiring the seller to maintain sufficient cash or margin collateral to purchase $100$ shares of the underlying stock at the strike price if assigned.

Thomas' Supply and Demand Indicator

A proprietary TradeStation-exclusive charting tool and alerting workspace priced at $\$1.29$ per month that plots automated supply and demand zones across multiple time frames.

Option Seller Win-Rate Edge

The statistical probability principle highlighted in the lecture stating that option sellers win roughly $70\%$ of the time, while option buyers win only about $30\%$ of the time.