McDonald's Becomes Latest Case Study for Wheel Strategy
The Wheel Strategy is a conservative options strategy that combines value investing with disciplined risk management. In a recent episode of the Value Options Letter and Acquirers Podcast, hosts Travis and Carlisle discussed the strategy using McDonald's (MCD) stock as an example.
Citing the attractive valuation of McDonald's, Carlisle said: 'I think 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.'
The hosts used a cash-secured put trade as an example, where investors sell puts on McDonald's stock at a strike price of $260 when the stock is trading around $270-$267. This allows them to earn premium income while limiting their potential losses if the stock price falls.
The Wheel Strategy also involves selling covered calls from the same position, allowing investors to benefit from any upside in the stock price while continuing to collect dividends. The hosts emphasized that this strategy is 'an educated approach' that requires knowledge and discipline.