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📚 Signal Guide - CSP Weekly Wheel Strategy
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About Weekly Wheel Strategy:
The Weekly Wheel strategy involves selling Cash-Secured Puts (CSPs) on a weekly basis.
This scoring system helps identify the best entry opportunities by evaluating trend stability,
mean reversion signals, liquidity, entry timing, and risk management.
1. EMA Trend
What it measures: Exponential Moving Averages (10, 20, 50-day) determine the stock's trend direction and stability.
Why it matters for CSP: Trend stability is the #1 predictor of successful CSP entries.
A stock in a strong downtrend (EMA 10 < EMA 20 < EMA 50) should be avoided entirely (0 points) as it indicates
continued downward pressure. Conversely, when price is below EMA levels, it suggests potential support and
a good entry point for selling puts.
Weekly Wheel Strategy: For weekly CSPs, you want stocks with stable or slightly declining trends
where price is near or below EMA support levels. This increases the probability that your put will expire
worthless or you'll be assigned at a favorable price.
2. RSI Level
What it measures: Relative Strength Index (RSI-14) indicates whether a stock is overbought (RSI > 70)
or oversold (RSI < 30).
Why it matters for CSP: RSI is the best mean reversion signal. Oversold conditions (RSI < 30)
suggest the stock may bounce back, making it an excellent time to sell puts. Overbought conditions (RSI > 70)
indicate the stock may pull back, reducing the likelihood of profitable CSP entry.
Weekly Wheel Strategy: For weekly CSPs, look for stocks with RSI between 30-50 (oversold to neutral).
This provides a good balance - the stock has room to recover, but isn't so oversold that it's in freefall.
You want to sell puts when the stock is temporarily depressed but likely to stabilize or recover.
3. Liquidity
What it measures: Trading volume (shares traded daily) indicates market liquidity and interest in the stock.
Why it matters for CSP: High liquidity ensures you can:
Get filled at better prices when selling puts
Exit positions quickly if needed
Benefit from tighter bid-ask spreads
Avoid assignment issues due to low volume
Weekly Wheel Strategy: For weekly CSPs, you need stocks with consistent, high volume (1M+ shares daily).
Low liquidity stocks can have wide spreads, making it harder to enter/exit positions profitably.
High volume also suggests the stock is actively traded, reducing the risk of sudden price gaps.
4. Bollinger Position
What it measures: Where the current price sits within Bollinger Bands (upper, middle, lower bands based on 20-day SMA ± 2 standard deviations).
Why it matters for CSP: Bollinger Bands help identify entry timing. When price is near the lower band,
it suggests the stock is oversold and may bounce back. This is an ideal time to sell puts, as you're entering when
the stock is temporarily depressed.
Weekly Wheel Strategy: For weekly CSPs, look for stocks where price is in the lower 40% of the Bollinger Band range.
This indicates the stock is near support levels and has room to recover. Selling puts when price is near the lower band
increases the probability of the put expiring worthless or being assigned at a favorable entry price.
5. ATR% Volatility
What it measures: Average True Range (ATR) as a percentage of price indicates the stock's volatility and price movement range.
Why it matters for CSP: ATR% screens out dangerous tickers. High volatility (ATR% > 5%) means:
Larger price swings that can quickly move against your position
Higher risk of assignment at unfavorable prices
More unpredictable weekly price action
Weekly Wheel Strategy: For weekly CSPs, prefer stocks with ATR% < 3% (moderate to low volatility).
While some volatility is needed for premium collection, excessive volatility increases the risk of assignment
and makes it harder to predict weekly price action. Lower volatility stocks provide more predictable outcomes
for weekly put selling.
Scoring Summary:
The total score (0-100) combines all five signals. Higher scores indicate better CSP entry opportunities:
Sell high-delta puts (40-45Δ) for maximum premium.
Downtrend:
Sell lower-delta puts (20-30Δ) for downside protection.
3. Assignment and Covered Call Rules
After assignment:
Sell calls at assigned trade price unless delta <15Δ.
IF Trade Price <15Δ:
Sell covered calls below trade price for premium, 15-25Δ.
IF Stock Surges Past Your Covered Call Strike:
a) Buy to Close Position IF near market close on expiration date, net of premiums received upon sale and BTC debit is still >1% ROI.
b) Roll Position UP and OUT only IF new strike equals "assigned trade price" and roll credit is >2% ROI.
c) Otherwise allow assignment.
4. Timeframe, Timing, & News
Option term:
Only sell short-term options (< 1 week).
Weekly start:
Wait ~1 hour into market on Monday before trading.
Earnings/Big news:
Never hold through earnings or major news; close positions and re-enter after.
Overnight/weekend:
Be in cash overnight and over weekends to avoid news gaps.
5. Stock Selection Filters
Fundamentals:
Only trade stocks with strong fundamentals.
RSI:
RSI must be between 30 and 70.
EMA trend:
Only open new put sells when 10EMA > 20EMA > 50EMA.
6. Position Sizing and Diversification
Max per position:
10% of portfolio.
Target count:
12-15 weekly positions for diversifying risk.
7. Profit Taking, Loss Rules & Recovery
Never realize option losses:
Do not sell a position for a loss. If assigned or a covered call is sold below the trade price, return to the wheel by selling puts.
Trade-price adjustment:
If a new sold-put strike differs from a prior covered-call strike, adjust your trade price by the difference to prevent locking in a loss.
8. Risk Controls and Cash Allocation
No margin:
Never use leverage.
Weekly drawdown rule:
Move to cash if account value drops >=5% in a single trading week due to significant negative momentum. Re-entry only once market stabilizes (10EMA>20EMA).
9. BTC Ladder (Buy-to-Close Guidelines)
Profit threshold to BTC by weekday:
Monday: >50%
Tuesday: >60%
Wednesday: >70%
Thursday: >80%
Friday: >90%
If thresholds not met: allow expiration unless other rules (roll/close) apply.
10. Practical Use & Card Tips
Order of operations:
Selection → Sizing → Timing → Management
Refer to these rules often:
Keep these rules accessible at your desk or trading station.
Weekly review:
Update cash target to reflect current market sentiment and confirm EMA/RSI filters before new put sells.