Our Strategy
Derivative Income Through the Options Wheel
A disciplined, repeatable methodology for generating cash flow from high-conviction equities — distinct from traditional dividends, powered by options premium.
What Is the Options Wheel?
The Options Wheel is a systematic strategy that cycles between two core options positions — cash-secured puts and covered calls — on a focused set of U.S. equities. The goal is to generate premium income at each stage of the cycle while maintaining exposure to companies we have high conviction in.
Unlike strategies that rely solely on stock price appreciation or dividend payments, the Wheel monetizes market volatility itself. When volatility is elevated, option premiums increase — creating opportunities for income generation that are independent of the direction the market moves.
How the Wheel Works
The strategy follows a repeatable cycle with two primary phases. Each phase generates option premium income regardless of whether the underlying position is acquired.
Sell Cash-Secured Puts
We sell put options on equities we want to own, at strike prices that represent what we consider favorable entry points. Cash is held in reserve to cover the potential purchase obligation.
If the option expires unexercised: We keep the premium collected and may sell another put, restarting this phase.
If the option is exercised: We purchase the shares at the strike price — a price we had already determined was acceptable — and move to Phase 2.
Sell Covered Calls
Once we hold shares, we sell call options against that position at strike prices above our cost basis. This generates additional premium income while we hold the stock.
If the option expires unexercised: We keep the premium and the shares. We may sell another call, continuing to generate income.
If the option is exercised: We sell the shares at the strike price and the cycle restarts at Phase 1 with a new cash-secured put.
This cyclical process — selling puts, potentially acquiring shares, selling calls, potentially selling shares — is the core of the Options Wheel. Premium income is collected at each stage.
How We Select Equities
We construct a concentrated portfolio anchored in long-term secular growth themes. Our current primary focus is the ongoing transformation driven by Artificial Intelligence and its impact on the broader technology landscape — including semiconductors, software infrastructure, and cloud computing.
Our investment process combines top-down thematic research with bottom-up fundamental analysis. For each candidate, we evaluate financial health — focusing on consistent revenue and profit growth — along with valuation metrics, management quality, and competitive positioning. Where possible, we favor companies that pay a dividend.
We also utilize technical analysis to inform entry timing, reviewing price trends and indicators such as proximity to 52-week highs and lows before initiating positions.
Why a Concentrated Portfolio?
Many portfolios are diversified to the point where individual positions have minimal impact — diluting potential returns alongside risk. We take a different approach: concentrating capital in our highest-conviction ideas.
A concentrated portfolio allows each position to meaningfully contribute to income generation through options premium. It also ensures we only hold companies we have thoroughly researched and are willing to own outright.
This approach is not suitable for every investor. It requires comfort with the reality that the performance of a small number of securities will have a disproportionate impact on total portfolio value. We are transparent about this tradeoff.
Risk Factors
The Derivative Income strategy involves material risks that prospective clients must understand before investing. The following is not exhaustive — please review our Form ADV Part 2A for complete risk disclosures.
Options Risk
Options are complex instruments and can be very risky. The strategy involves selling options, which obligates the seller to buy or sell shares at a predetermined price. In certain market conditions, losses can be substantial. Options trading is speculative and involves a high degree of risk.
Concentrated Portfolio Risk
Accounts will typically hold a limited number of securities. The performance of a small number of holdings will have a disproportionate impact on the total portfolio. A decline in the value of a single holding could result in a significant loss to the entire account. Concentrated portfolios may experience greater volatility than the overall market.
Market & Timing Risk
Technical analysis may not accurately detect anomalies or predict future price movements. Current prices may already reflect all known information, and day-to-day price changes may follow unpredictable patterns. Fundamental analysis carries the risk that information obtained may be incorrect or that earnings estimates may not be accurate.
Margin Risk
If appropriate for your objectives and risk tolerance, accounts may utilize margin. If the value of securities declines, you may be required to deposit additional cash or sell securities to meet margin requirements. The use of margin increases both the potential for gain and the risk of loss.
Frequent Trading
The strategy may involve frequent trading, including selling securities within 30 days of purchase. Frequent trading can negatively affect investment performance through increased transaction costs and taxes.
Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
Who Is This Strategy Designed For?
The Derivative Income strategy is designed for sophisticated investors who understand and accept the risks of a concentrated, options-based approach. Suitable clients typically share these characteristics:
- — A higher risk tolerance and comfort with portfolio volatility exceeding broader market indices
- — An interest in income generation beyond traditional dividends
- — Familiarity with options contracts and derivative instruments
- — A long-term investment horizon that can withstand short-term drawdowns
- — An understanding that this is a single-strategy, non-diversified approach
We do not attempt to be everything to every investor. We offer one strategy, executed with discipline and full transparency.
Want to learn more about our approach?
Schedule a consultation to discuss whether the Derivative Income strategy aligns with your investment objectives and risk tolerance.
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