Lowering cost basis via the wheel strategy
The speakers argued that investors can utilize the cash-secured put and covered call 'wheel' strategy to acquire high-quality equities at a discount while targeting double-digit annualized returns.
The argument
The guest explained that by selling puts at conservative target strikes (such as Berkshire Hathaway's historical book-value buyback thresholds), investors either collect premium or buy quality companies like Amazon at a discount, subsequently writing covered calls to further lower their cost basis.
The thesis, stress-tested
✓ What validates it
- ✓Generating consistent double-digit annualized yields on cash-secured positions
- ✓Successful acquisition of target stocks at designated discount strikes during market pullbacks
▸ Risks discussed
- ▸Underlying stock price falling significantly below the put strike price
- ▸Capping upside potential if the stock rallies sharply past the covered call strike
Hear it yourself
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