Options Basics
Before running any strategy, you need to understand these core concepts.
What an option is
An option is a contract between two people. The buyer gets a right. The seller takes on an obligation. On Wheelhouse, you are almost always the seller, which means you collect income upfront and agree to follow through if the buyer acts.
Calls and puts
A call relates to buying stock. A put relates to selling stock. When you sell a call, you may have to sell your shares at the strike price. When you sell a put, you may have to buy shares at the strike price. Both can work in your favor with the right setup.
Strike price
The strike price is where things get real. It is the price at which shares could be bought or sold if the option is used. Your income and your risk both revolve around this number.
Expiration
Every option has an expiration date. After that date, the contract is gone. Most income trades use expirations between two and four weeks out. Shorter gives you more frequent income. Longer gives you more breathing room.
Premium
Premium is the price of the option and the income you collect when you sell. One contract always covers 100 shares. Higher premium usually means more risk, not more opportunity.
Assignment
Assignment means the buyer used their option. If you sold a put, you buy shares at the strike. If you sold a call, you sell your shares at the strike. In income strategies, assignment is not a failure. It is part of the plan.
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