Systematic options wheel strategy using RSI to guide entry and exit.

Okay, I've taken a look at the Reddit discussion "RSI options strategy" (ID: 1l60th0) based on the provided context and previous analysis.

Investment Analysis Summary: The conversation centers around a user-generated options trading strategy that uses the Relative Strength Index (RSI) to guide decisions for the "wheel" strategy, particularly for portfolio allocation and risk management. The user plans to apply this strategy starting with their position in $HOOD. Comments show interest, seek validation, and suggest refinements like incorporating Delta percentages. Overall, the sentiment towards the strategy concept is positive and inquisitive.

Monitored Mentions:

• Stock Tickers:
  • $HOOD (Robinhood Markets, Inc.) - Mentioned as the stock the user plans to apply the strategy to after their current $50 covered calls are potentially called away.
• Crypto Symbols:
  • None mentioned.
• General Investment Terms:
  • RSI (Relative Strength Index)
  • Options strategy
  • Wheel strategy
  • Portfolio allocation
  • CC (Covered Calls)
  • CSPs (Cash-Secured Puts)
  • OTM (Out of the Money)
  • ATM (At the Money)
  • ITM (In the Money)
  • Delta %
  • DD (Due Diligence)
  • Conviction
  • Premium

Sentiment Analysis:

• Overall Sentiment: Neutral to Positive/Bullish on the strategy concept.
  • The original poster expresses intent to implement ("Going to start implementing"), indicating a bullish view on the strategy's potential.
  • Commenters find it "interesting" and an "interesting take," appreciating the active risk management aspect ("Taking some off the table when RSI is high and being aggressive on extreme oversold conditions").
  • There's an appetite for validation and refinement (e.g., Delta % usefulness).
• Specific Sentiment on $HOOD: The user has an active covered call position on $HOOD, implying they either own the shares or are willing to sell them at $50. Their plan to implement the RSI strategy on $HOOD suggests they are willing to continue trading this underlying.

Discussion Volume:

• Low. The discussion is limited to the original post and a few comments. The focus is on the methodology rather than a specific breaking news event or rapid price movement.

Investment Opportunity Screening:

The primary "opportunity" discussed is the RSI-based options wheel strategy itself. This is a systematic approach to managing entries and exits or generating income from stocks an investor is willing to hold long-term.

• For $HOOD:
  • If the user's $50 HOOD CCs get called away, and if HOOD subsequently shows an oversold RSI reading (e.g., <30), an opportunity might arise to sell ATM or ITM CSPs to re-acquire shares at a potentially favorable price, collecting a higher premium.
  • If the shares are not called away and HOOD becomes overbought (e.g., RSI > 70), an opportunity exists to sell new CCs.

Investment Advice & Plan:

The proposed RSI-based options strategy is a sound framework for disciplined trading, aiming to remove emotion and provide clear action signals. It aligns well with the "wheel" strategy.

Core Strategy (Reiteration & Refinement): This strategy should be applied to stocks you are fundamentally comfortable owning long-term.

1. Stock Selection: Perform due diligence (DD) on any stock before applying this strategy. Ensure it's a company you're willing to hold.
2. RSI for Entry (Selling Cash-Secured Puts - CSPs):
   • Condition: Stock is deemed attractive for long-term holding, AND RSI indicates an 'oversold' condition (e.g., RSI < 30, or even < 20 for extreme conditions).
   • Action: Sell CSPs.
     • Aggressiveness (based on RSI severity & conviction):
       • Moderately Oversold (e.g., RSI 20-30): Consider selling OTM puts (e.g., 0.20-0.30 Delta) for a balance of premium and probability of assignment.
       • Deeply Oversold (e.g., RSI < 20) / High Conviction: Consider selling ATM or slightly ITM puts (e.g., 0.40-0.60 Delta, or higher for deep ITM). This offers higher premiums and a better effective entry price if assigned, but also higher capital requirement and risk if the stock continues to fall significantly.
3. RSI for Income/Exit (Selling Covered Calls - CCs) - If shares are owned:
   • Condition: You own the shares (either through assignment from a CSP or outright purchase), AND RSI indicates an 'overbought' condition (e.g., RSI > 70, or even > 80 for extreme conditions).
   • Action: Sell CCs.
     • Aggressiveness (based on RSI severity & desire to exit):
       • Moderately Overbought (e.g., RSI 70-80): Consider selling OTM calls (e.g., 0.20-0.30 Delta) to generate income while allowing for further upside.
       • Deeply Overbought (e.g., RSI > 80) / Willingness to Exit: Consider selling ATM or slightly ITM calls to maximize premium and increase the probability of shares being called away at a profit.
4. Managing the Position ("The Wheel"):
   • If CSP expires worthless: Keep the premium, wait for another oversold signal.
   • If assigned on CSP: You now own the stock at your desired (or lower) effective price. Switch to selling CCs when RSI becomes overbought.
   • If CC expires worthless: Keep the premium, wait for another overbought signal to sell new CCs.
   • If shares called away via CC: You've sold at a profit (hopefully). Revert to step 2, looking to sell CSPs when the stock becomes oversold again or move to another stock.

Specific Plan for User (e.g., with $HOOD):

• Current State: User has $50 HOOD CCs.
• Scenario 1: HOOD CCs get called away.
  • The user no longer owns HOOD shares.
  • Action: Monitor HOOD's RSI. If HOOD's RSI drops below 30 (or a preferred oversold threshold), consider selling CSPs on HOOD (e.g., ATM or slightly OTM, depending on risk tolerance and premium desired). The choice of strike should align with a price they are comfortable re-acquiring HOOD.
• Scenario 2: HOOD CCs expire worthless.
  • The user still owns HOOD shares.
  • Action: Monitor HOOD's RSI. If HOOD's RSI rises above 70 (or a preferred overbought threshold), consider selling new CCs on HOOD (e.g., OTM to ATM, depending on income goal vs. desire to keep shares).

General Recommendations:

• Delta Consideration: As mentioned in comments, Delta is a useful metric. Lower Delta (further OTM) options offer lower premiums but a lower probability of assignment. Higher Delta (closer to ATM/ITM) options offer higher premiums but a higher probability of assignment. Adjust Delta based on your conviction, the RSI reading, and your objective (e.g., aggressive entry vs. conservative income).
• Risk Management:
  • Only "wheel" stocks you are truly willing to own.
  • Ensure you have the cash to cover CSPs if assigned.
  • Be aware of potential opportunity costs if your shares are called away via CCs and the stock continues to rise significantly.
  • This strategy does not eliminate risk; it aims to manage it systematically.
• Start Small: If new to this specific strategy, consider paper trading or starting with a small allocation to gain experience.
• Broader Context: While RSI is a useful indicator, don't rely on it exclusively. Consider overall market conditions, sector trends, and company-specific news.

This structured, RSI-guided approach to the wheel strategy can be effective for disciplined investors.