I certainly don’t have more experience than you , but I’ve been doing this for about a month so I’ll comment. My goal was to get back in after selling at $595. Stock was dropping fast, I had LEAPS and a few core shares. Dumped everything. Around $500 I decided to get back in and read about this wheel thing.

My wheel hasn’t spun much, but I did learn a bit:

• The sold put risk was fairly easy to accept. I wanted back in, so I sold a put for the price at that moment. If it dropped a lot lower, eh, I it’s the price I would have happily bought in anyway so I’m no worse off.
• A corollary to that, as you noted, is if the stock went up much I could close my previous sold put and resell a new one at the new higher price. In that way, I wasn’t missing out on much of the rise as the put premiums were covering much of it.
• The sold call risk, once assigned, was harder to accept. I could do the reverse on a price drop, keep reselling calls, but I didn’t want to miss a big upswing
• So, adjustment to sold calls, take 50% of the premium and buy 2x those calls at whatever strike that could buy. If the stock is flat, I win. If the stock is up a little, I win or break even. If the stock goes WAY up, that 2x calls I bought more than makes up for it. Just leaving a window where I’d lose if it went up above my strike + 50% premium, but not enough to get offset by the higher strike 2x calls. Given how TSLA moves, that slow rise doesn’t happen much now.

….

This is awesome.

And your adjustment to handle upside is interesting – I hadn’t thought of that. So many paths here

Clearly, you’re going about this a lot more actively than I am. Which also illustrates that there’s a pretty big range for this to operate in. Looks like you’re also using the weeklies frequently, and by selling near / ATM options, you’re getting a LOT more premium than my far OTM approach. And with weekly you can turn this over faster.

Something I’ve seen, and looks like you have as well, is that the sold options are frequently closable well before expiration. In the optionsalpha strategy, they target 50% of the theoretical return as the time to close. They are also opening and closing multiple positions a day in their larger strategy, and I’m hoping to open and close <10 positions per month. So I’m probably looking for closer to 75% (when I have another position I’d like to get into) to 90% to enable a smaller / weaker position. I had an option in position to expire worthless, when I decided I was better off closing that one and opening a new one for April 24. Only about $2 in premium on those puts, but that was a lot more than the rough $0.10 that was left for the old option to age out

It’s a minor deal, but my broker (Fidelity) enables a close order for .65/share or less for free (no commission). It’s to enable good option behavior – clean up small positions prior to expiration. That’s a savings of 6.5 cents/share, so that’s another good threshold to end things (especially at the smaller premium levels I’ve been using so far).

Something I learned that I’m still working into my decision making process for which strikes to sell. You can use Delta as a proxy for Probability ITM. So if the delta on an option is 0.30, that’s also a way of saying that the market has priced that option as having a 30% chance of finishing ITM.

There’s several other pieces of info around that.

For short periods, measured over the life of the market, stocks are a random walk (50% up / down). They end up forming a normal distribution for their ending price. Thus you can calculate what the market prices to be 1 standard deviation for the share price, and that represents the range in which the market says there is a 68% chance of the stock finishin in. You can calculate 2 standard deviations, and that’s the 95% range that the market expects the stock to finish within. Where “the market” is the weighted average of all the options in the market, and the prices they’re trading at.

As delta is amazingly close to Prob ITM, around a .30 delta is a 30% chance ITM at expiration. I don’t know the theory behind this, but there’s a second characteristic called Touch. Touch is the probability of an option being ITM at some point during it’s life – that’s 2x the chance ITM at expiration. So that .30 delta option has a 60% chance of Touching the strike at some point, but 30% of finishing ITM.

Here’s what I’ve gotten from all that, that helps me select options to sell.

Somewhere around the .15/.16 delta, that’s the one standard deviation level. (When you sell a put for instance, at 1 stddev it’s got 34% above and 34% below the mid point. To finish ITM, it’s got to get below the .16 that’s below the midpoint). And that’s an 84% chance of being OTM. 84% OTM suggests you’ll be ITM about 1 in 6, so be ready for assignment twice / year (one sale in 6), or at least ready to make changes to that sold put to avoid being assigned.

The second stddev is around .03 delta (2.5%).

From what I can tell, that first stddev – delta’s above that level generate much higher premiums / option prices. There’s another pretty big pricing change around that .03 delta.

I’m hoping that with repetition, I’ll get an idea of the delta I want to target for my strikes