by 
I spend a lot of time in options trading communities.
Reddit threads, Discord servers, DMs from readers.
And the same story plays out over and over:
- Someone discovers the Wheel
- Runs it for a few months
- Makes some money
- …and then gets absolutely crushed on a single trade
The details change. The ticker changes. The account size changes.
But the mistakes? Those are always the same.
Wheel traders consistently blow up their accounts by making the same seven mistakes:
- Ignoring the Greeks
- Selling into the wrong volatility
- Trading illiquid options
- Skipping fundamentals
- Oversizing positions
- Letting emotions drive decisions
- Wheeling stocks they don’t have any business owning
Let’s review each of them in detail.
Table Of Contents
Why Ignoring the Greeks Leads to Bad Strike Selection
There are two versions of this mistake:
- The first is skipping the Greeks entirely and picking strikes by “feel” or round numbers
- The second is looking at premium dollars without checking what delta and theta are actually telling you
Picking a strike because it pays $2.00 in premium tells you nothing about the probability of assignment or how efficiently that premium decays in your favor.
$2.00 on a high-delta strike is a completely different trade than $2.00 on a low-delta strike.
The dollar amount is identical. The risk profile is not.
And here’s the thing:
High-theta strikes can also be high-delta strikes.
More daily decay sounds great, right? The problem is that higher theta comes packaged with a higher probability of getting assigned.
You’re collecting more per day, but you’re also far more likely to be assigned and end up owning the stock.
The Greeks aren’t optional. They’re the difference between a calculated risk and a blind bet.
Note: Gamma makes this worse near expiration, by the way. It accelerates delta shifts, which is why short-DTE trades can whipsaw your position even if delta looked comfortable when you entered. This is one of many reasons I prefer selling 30-52 DTE rather than weeklies.
If you want the full framework on how delta drives strike selection, I wrote a complete guide on the topic, Understanding Delta: The Most Important Greek for The Wheel Strategy.
And for how theta decay actually works in practice, see Understanding Theta: Time Decay and The Wheel Strategy.
What Happens When You Sell Premium Without Checking Volatility
This mistake has two sides:
- Selling because Implied Volatility “looks high” without checking whether Historical Volatility is equally high
- Selling when IV is actually low without realizing premiums are paper-thin
High IV alone is not a green light.
If HV matches IV, the market is pricing in real risk, not handing out free money. You’re being compensated for actual movement, not collecting mispriced premium.
I see this constantly in trading communities.
Someone posts a screenshot of a fat premium, everyone piles in, and nobody checks whether the stock has been actually moving that much. The “free money” crowd learns the hard way that the market doesn’t misprice risk nearly as often as Reddit thinks.
The flip side is just as dangerous.
Selling when IV Rank is below 30 means you’re near the bottom of the stock’s own volatility range. Premiums are thin, there’s no IV crush potential working in your favor, and you’re wondering why the payoff is so small.
Effectively, you’re selling cheap insurance. That’s exactly what it pays like.
Before every trade, run the volatility checklist and ask yourself these three questions:
- What’s the IV Rank?
- Is there a meaningful gap between IV and HV?
- Why is IV elevated?
That last question is the most important.
A stock with elevated IV because of routine earnings uncertainty is a different animal than one with elevated IV because of fraud allegations or a looming FDA decision.
One is a tradeable event…the other is a landmine.
Remember, volatility is context, not a signal.
Without context, high IV is just a number.
With context, it’s a decision framework.
For the full volatility framework I use before every Wheel trade, see IV and HV: Using Volatility to Select Better Wheel Trades.
How Illiquid Options Silently Destroy Your Returns
This is the mistake you might not even realize is costing you money.
Wide bid-ask spreads silently eat your premium. On illiquid options, the spread can swallow 20-50%+ of the premium you collected before the stock moves a penny.
Think about what that means in practice:
Say the fair value of a put is $1.00, but the chain is somewhat illiquid with a wide spread, printing a bid of $0.60 and an ask of $1.40.
- On entry: You sell to open and want to fill near the ask to maximize premium, but with so few participants on the chain, your order gets dragged down toward the bid and fills at $0.65 — $0.35 less than fair value, gone before the trade even starts
- On exit: A week later the option’s fair value drops to $0.50 and you want to close near the bid to minimize what you pay…but the spread is still wide because the chain is still illiquid. You get dragged up toward the ask and fill at $0.85
You collected $0.65 and paid $0.85 to close. You lost $0.20 on a trade that moved $0.50 in your favor. The spread ate the entire profit and then some.
(And yes, this happens more often than you’d think.)
The hidden danger is even worse: when you need to exit early, nobody is on the other side of the trade.
You’re trapped in a position you can’t close at a fair price.
Both problems compound over time.
The Wheel involves repeated trades. Even modest spread costs add up across dozens of cycles per year.
A 10% spread cost on each trade doesn’t feel like much in isolation, but across 40-50 trades per year it’s a meaningful drag on returns.
The fix is straightforward:
Check volume and open interest before every trade.
If the options chain looks empty at your target strike and DTE, pick a different stock or expiration. No amount of premium is worth trading an option that you can’t exit at a fair price.
Illiquid options often show up on exactly the kind of stocks that look attractive from a premium standpoint (funny how that works, right?).
The premium is fat because nobody else wants to trade it.
That should be a warning, not an invitation.
For a deeper dive into how spreads impact your premium and what to look for, see Understanding Bid-Ask Spreads and Options Liquidity.
Why Skipping Options Basics Sets You Up to Fail
There are two layers to this mistake.
The first is skipping the basics entirely. Some traders start selling CSPs without a solid grasp of what strike, expiration, and premium mean, or how to read an options chain to evaluate a trade.
That’s building on sand.
If you don’t understand the mechanics of what you’re trading, every decision becomes a guess. And guesses don’t compound into a system.
If you need a refresher on the basics, start with What Are Stock Options? A Beginner’s Guide. It covers everything from calls and puts to how options contracts actually work.
The second layer is deeper, and it trips up even traders who think they understand the Wheel.
Assignment is a feature of the Wheel, not a failure. This is worth repeating because it’s the single most misunderstood aspect of the strategy.
If you sell a put, you might buy 100 shares. That’s the strategy working as designed.
Traders who panic at assignment didn’t understand the trade they entered. They treated the CSP as a premium-collection machine and forgot (or never learned) that the other side of the trade is stock ownership.
If getting assigned feels like a surprise, you skipped a step.
This is the most common story I hear:
“I sold a put for the premium and then the stock dropped and now I’m stuck with 100 shares I don’t want.”
You were never “stuck”. You entered a contract that said you’d buy shares at that price. The contract did exactly what it was supposed to do, you just didn’t do your research ahead of time.
For a full breakdown of what can go wrong with the Wheel (and how to handle it), see Understanding Risks with The Wheel Strategy.
How Poor Position Sizing Turns One Bad Trade into a Blown Account
This is really three facets of the same underlying mistake: not respecting how much damage a single bad trade (or a correlated cluster of trades) can do to your account.
Position sizing isn’t about maximizing returns. It’s about surviving long enough to compound returns.
Most new Wheel traders think about what they can gain. Experienced ones think about what they can afford to lose.
Remember, it’s hard to get rich if you keep going broke.
Going All-In on a Single Position
Deploying all your capital into one CSP means one bad trade wrecks the account.
No diversification. No margin for error. No ability to take advantage of opportunities that show up while your capital is locked.
I’ve seen traders with $25K accounts sell a single CSP on a $24 stock, tying up nearly their entire account in one position. When the stock dropped 15%, there was nothing left to do but watch.
If a single assignment can take you out of the game, your position is too large.
No Capital Reserves
Being fully deployed with no cash left means you can’t:
- Manage assignments when they happen
- Take advantage of new setups that appear
- Survive a drawdown without panic-selling
Capital reserves aren’t idle money. They’re strategic flexibility.
When everything is deployed and a stock drops through your strike, your only options are bad ones:
- Sell at a loss to free up cash
- Close other positions at suboptimal prices to free up capital
- Hold and hope (never a strategy)
None of those are good decisions made from a position of strength. You’re reacting, not managing.
Concentration Risk
Running multiple Wheel positions in the same sector or on correlated stocks may feel like diversification, but it isn’t.
When the sector drops, they all blow up together. Three positions in energy stocks aren’t three independent bets. They’re one bet with three tickers.
This is especially dangerous in a broad market selloff.
Correlation spikes during panic, and suddenly your “diversified” portfolio of five different tech stocks is moving in lockstep. What looked like five independent positions turns out to be one big directional bet on the NASDAQ.
Poor position sizing amplifies every other risk on this list.
For more on how these risks compound, see Understanding Risks with The Wheel Strategy.
Why Emotional Trading Is the Fastest Way to Lose Money with the Wheel
Every Wheel trader (and investor) feels these emotions.
I feel them.
You feel them.
The trader with a $2M account feels them.
Hell, even the greats like Warren Buffet and Charlie Munger feel them.
But remember, the mistake isn’t feeling them. The mistake is acting on them instead of following your process.
Panic-Closing
Consider watching your position go red. The stock keeps dropping, and every tick lower makes it harder to sit still.
You close the position at a loss to stop the bleeding… and the stock reverses the next day.
The original thesis was intact the whole time.
You didn’t have a strategy problem.
You had a nerve problem.
And now you’ve locked in a loss that the market would have erased for you if you’d just sat on your hands.
FOMO Entries
A stock is popping on Reddit. The premium looks incredible. You don’t want to be the one who missed it.
You skip your checklist and sell the put.
Two weeks later, the hype fades and you’re holding shares of something you never actually researched.
Now you’re stuck in a position with no exit plan and no conviction in the underlying. You don’t even know if the company has earnings, let alone when they report.
Revenge Trading
You just closed a loser. The sting is fresh.
You scan the chain for the fattest premium you can find and enter a new trade immediately, not because the setup is good, but because you need to “make it back.”
(Hint: You won’t make it back this way.)
Revenge trades are almost always oversized, under-researched, and entered at the worst possible time.
This is how one loss becomes two.
And then three.
Finally, you have a blown account staring back at you.
Impatience
It’s been a week with no trades. Everything is either too expensive, too illiquid, or doesn’t meet your criteria.
You start get a little itchy, looking for some action.
You start relaxing your rules just to get into something.
- Maybe you widen your delta target
- Maybe you pick a stock that doesn’t quite meet your criteria
- Maybe you sell a shorter DTE than you normally would
Sometimes (and mostly, often) the best trade is no trade. Sitting in cash when nothing meets your criteria isn’t laziness. It’s discipline.
The emotional patterns are different, but the root cause is always the same.
No system. No rules. No predefined process for when things get uncomfortable.
The real fix is having rules in place before the emotions show up.
- What delta do I target?
- When do I take profits?
- When do I cut losses?
- What’s my maximum position size?
If you haven’t answered these questions in writing before the trade, you’ll answer them in the moment.
And in the moment, your emotions will do the answering.
Without a system, emotions fill the gap every time.
(Therapist voice: You don’t need to rationalize your feelings, but make sure you rationalize your trades, or the market will do fit for you.)
Why Wheeling Stocks You Don’t Want to Own Is the Biggest Mistake of All
Stock selection is 90% of the Wheel.
You can…
- Nail every Greek
- Check every volatility metric
- Trade the most liquid options on the chain
- Size your positions perfectly
- Manage your emotions like a Zen monk
- …and still lose money if you’re Wheeling the wrong stock.
Remember:
Premium is the bait. Assignment is the hook.
Fat premium on a stock you’d never buy outright feels like free money… until you’re holding 100 shares of something you don’t believe in, watching it drop 30%.
At that point, the premium you collected is a rounding error against the loss.
Before opening a position, ask yourself the following question:
Would you buy this stock at this price and hold it for 6-12 months, even without the options premium?
If the answer is “No”, don’t sell the put.
Full stop. No exceptions, no “but the premium is so fat.”
The premium is fat because the risk is real.
Now let’s explore three categories of stocks that consistently trap Wheel traders.
Meme Stocks and the Premium Trap
Let’s say you sell a CSP on the latest Reddit darling because the premium is 3x what you’d get on a blue chip. The stock runs on pure hype, no earnings, no revenue trajectory.
When the momentum crowd moves on, the stock drops 60% in a week and you’re assigned at a strike that’s now deep underwater.
The premium is high on those names because the risk is high.
Implied volatility reflects the market’s expectation of how much the stock can move, and meme stocks move a lot.
When they move against you, you’re stuck owning something with no fundamental floor:
- No earnings growth to fall back on
- No dividend to collect while you wait
- No thesis for why the stock should ever recover
The premium looks amazing right up until the stock craters.
High-Flier Growth Stocks with Sky-High Valuations
Now let’s suppose a tech stock trading at 80x earnings has been on a tear for months.
IV is elevated, the premium is juicy, and it feels like the stock can only go up.
Then one earnings miss or downwards guidance, and the stock gaps down 25% overnight.
Your “safe” CSP at a 20-delta strike is suddenly deep in the money.
Sky-high valuations mean massive downside when sentiment shifts.
The premium doesn’t compensate for the risk of catching a falling knife. A stock that gaps down 25% overnight can erase years of premium income in a single session.
And unlike a value stock trading at 12x earnings, there’s no valuation floor to catch you.
Stocks You Haven’t Researched
Someone in your Discord group mentions a ticker you’ve never heard of. You pull up the chain, see decent premium, and sell the put without knowing what the company does or how it makes money.
A week later, they announce a dilutive offering and the stock drops 20%.
You had no way to see it coming because you never looked at the balance sheet, the earnings history, or the share structure.
If you can’t explain what the company does, how it makes money, and why you’d want to own it, you have no business selling puts on it.
I don’t mean to sound like an ass, but this is the bare minimum of due diligence.
Don’t Prioritize Premium Over Conviction
The above three categories all share the same root cause — prioritizing premium over conviction.
Could I have made this point more diplomatically?
Maybe a bit more calmly and gently?
Absolutely.
But here’s the thing:
Every other mistake in this article is recoverable with better process and more discipline.
This one can blow up your account.
So, if I have to yell at you like your grandpappy did after you stole his parking spot at the family barbecue, that’s just the way it is.
(Not like that ever happened to me or anything…)
Do your homework on the stock first, then worry about the options.
Get the stock selection right and the rest of the Wheel becomes dramatically easier. Get it wrong, and no amount of Greek optimization or volatility analysis will save you.
Where to Go After Fixing These Mistakes
Every experienced Wheel trader, including myself, has made at least a few of these.
Personally, I’ve made all these mistakes at one time or another.
The here goal isn’t perfection. It’s awareness.
You don’t need to eliminate every mistake before you start, you just need to recognize them when they’re happening so you can course-correct before they compound.
Knowing what to watch for puts you ahead of most traders who learn these lessons the expensive way.
I’m a big fan of the saying:
Lessons aren’t free, and the good ones are expensive.
But they don’t have to be so expensive that they blow up your entire account.
That’s the whole point of this article.
But I digress…
