To The Moon

🥇 Part 1: My Gold Wheel Strategy — Selling Cash-Secured Puts and Covered Calls on Gold

🐶 My Options Puppy Approach to Gold

🐶 I have always liked the idea of using options not only to speculate, but also to generate income while waiting to own an asset at a price I am comfortable with. For gold, one of the instruments I can use for this strategy is the iShares Gold Trust, or IAU. Instead of simply buying IAU and waiting for the price to rise, I can use the Wheel Strategy to potentially collect option premium along the way.

💰 My basic idea is simple: sell a cash-secured put when I am willing to buy IAU, and if I eventually get assigned the shares, sell covered calls while I hold them. If the shares are called away, I can potentially start the process again by selling another cash-secured put.

⸻

🥇 Step 1: IAU Was Trading Around $82

📈 In my example, IAU was trading around $82 when I looked at the options chain. Rather than buying 100 shares immediately at around $82, I decided that I was comfortable owning IAU at a lower effective price.

🎯 My target was the $80 strike price. The important thing about selling a cash-secured put is that I must be genuinely comfortable buying 100 shares at the strike price if the option is assigned.

💵 The $80 strike requires me to set aside approximately $8,000 for 100 shares. In exchange for accepting this obligation, I received an option premium of $0.59 per share.

⸻

💰 Step 2: I Collected $59 in Premium

🤑 One options contract normally represents 100 shares. Therefore, selling the $80 put for $0.59 gives me:

$0.59 × 100 = $59 premium

💡 This $59 is important because it immediately reduces my effective purchase price if I eventually get assigned the shares.

📉 My calculation becomes:

$80.00 strike − $0.59 premium = $79.41 effective cost

🎯 So although the contractual strike price is $80, I can think of my effective entry price as approximately $79.41, before commissions and other transaction costs.

⸻

🛡️ Step 3: Why I Call It a Cash-Secured Put

🔐 A cash-secured put means I have enough cash available to purchase the shares if assignment occurs. I am not simply selling a naked put and hoping everything goes up.

💵 In my example, I am prepared for approximately $8,000 of capital to be used if I am assigned 100 shares at $80. The $59 premium is additional income from taking on that obligation.

🐶 This is important for my Options Puppy philosophy: I don’t sell a put just because the premium looks attractive. I sell the put because I am willing to own the underlying asset.

⸻

📊 Step 4: What Happens If IAU Stays Above $80?

😊 The first possible outcome is that IAU remains above the $80 strike price at expiration.

📈 If IAU stays above $80, the $80 put may expire worthless. I don’t get assigned the shares, and I keep the $59 premium.

💰 In this situation, I have generated income without purchasing the 100 shares.

🔄 I can then look for another opportunity to sell another cash-secured put, depending on the price of IAU, the option premium available, the market trend and whether I am still comfortable owning gold at the selected strike.

⸻

📉 Step 5: What Happens If IAU Falls Below $80?

😅 The second possibility is that IAU falls below $80 and I am assigned 100 shares.

🎯 But this is not necessarily a disaster because assignment was already part of my plan.

💵 My contractual purchase price is $80, but because I collected $0.59 in premium, my effective cost becomes:

$80 − $0.59 = $79.41

📌 If IAU falls to $78, for example, I would have an unrealized loss based on my $79.41 effective cost. But I entered the trade knowing that I was willing to own IAU around the $80 area.

🐶 This is the key difference between a planned wheel trade and randomly buying a falling asset: I already decided in advance what price I was comfortable paying.

⸻

🔄 Step 6: This Is Where the Wheel Begins

🎡 Once I am assigned 100 shares, the strategy can move to the second stage of the Wheel: selling a covered call.

📞 A covered call means I own 100 shares of IAU and sell one call option against those shares.

💰 For example, if I own IAU after assignment and I believe the price can continue rising but I am also willing to sell my shares at a higher price, I can sell a call above my effective cost.

🎯 Suppose my effective cost is $79.41. I could consider a covered call with a strike such as $82, $83 or another level that matches my outlook.

⸻

🏆 Step 7: Why Sell a Covered Call?

💵 The covered call allows me to collect another option premium while holding the shares.

📈 If IAU remains below my call strike until expiration, the call may expire worthless. I keep my 100 shares and keep the premium.

🔄 I can then potentially sell another covered call.

💰 This creates another source of option income on top of any movement in the underlying asset.

🐶 My thinking is therefore:

Sell put → collect premium → get assigned → sell covered call → collect premium → potentially get called away → repeat.

🎡 That is the basic Wheel.

⸻

🚀 Step 8: What If IAU Rises Strongly?

🥇 This is where I need to understand the trade-off.

📈 Suppose I own IAU at an effective cost of $79.41 and sell a covered call at an $82 strike. If IAU suddenly rallies well above $82, my shares could potentially be called away.

💰 I would receive the strike price for the shares, while also keeping the option premium I collected.

😊 That can produce a combination of capital appreciation plus option income.

😅 However, there is a major trade-off: if IAU continues soaring after my shares are called away, I don’t participate in all of that upside.

📌 This is one of the most important lessons of covered calls: the premium is compensation for giving someone else the right to buy my shares at the strike price.

⸻

🧮 Step 9: Thinking About My Real Cost

📊 I like to track the Wheel based on my accumulated option premiums rather than looking at every transaction separately.

💰 In my initial example:

Put strike: $80

Put premium: $0.59

Effective cost: $79.41

📈 If I subsequently sell a covered call and collect another $0.50, my accumulated option income becomes $1.09 per share.

🎯 Conceptually, my adjusted economic basis could then become:

$80 − $0.59 − $0.50 = $78.91

📌 Of course, for actual brokerage, tax and accounting purposes, I should track each transaction separately. But for my own Wheel journal, this adjusted-cost concept helps me understand how much premium I have generated.

⸻

🐶 Step 10: I Don’t Want to Chase Premium

⚠️ One mistake I want to avoid is selling options simply because the premium looks attractive.

💡 A high option premium usually exists for a reason. It can indicate higher volatility, a larger expected price movement or greater uncertainty.

📉 If I sell a put simply because I can collect a large premium, but I don’t actually want the shares, I could end up owning an asset that I never wanted.

🎯 My rule is therefore:

I sell puts only at prices where I am genuinely comfortable owning the shares.

📞 Similarly, I sell covered calls only at prices where I am genuinely comfortable letting my shares go.

⸻

🥇 Why I Like Using IAU for This Concept

🏆 IAU gives me exposure to gold through a listed security rather than requiring me to physically store gold.

💡 That makes it interesting for an options-based strategy because I can combine the underlying exposure with listed options.

📊 Instead of thinking only, “Will gold go up?”, I can think in terms of several possible outcomes:

Gold rises → my shares can appreciate.

Gold stays sideways → option premiums may provide income.

Gold falls moderately → my put premium provides some downside cushion.

Gold falls sharply → I can still suffer losses because the premium is only a small buffer.

🐶 The Wheel therefore isn’t a magic strategy that eliminates risk. It simply changes how I participate in the underlying asset.

⸻

🛡️ My Biggest Lesson: Premium Is a Cushion, Not Protection

⚠️ If I collect $0.59, I have only received $59 on one contract.

📉 If IAU falls from $80 to $70, the $0.59 premium does not protect me from the majority of that decline.

💡 My effective cost would still be $79.41, meaning I would have a substantial unrealized loss.

🎯 Therefore, the Wheel works best for me when I select an underlying asset I am comfortable holding and a strike price that gives me a reasonable margin of safety.

⸻

🥇 My Gold Wheel Framework

🐶 My simple Options Puppy framework for gold is:

1️⃣ IAU around $82 → I decide whether I want to own it lower.

2️⃣ I sell the $80 cash-secured put.

3️⃣ I collect $0.59 → $59 per contract.

4️⃣ If assigned → I receive 100 shares at $80.

5️⃣ After the $0.59 premium → my effective cost is $79.41.

6️⃣ I can then sell a covered call.

7️⃣ If the call expires → I keep the shares and premium.

8️⃣ If my shares are called away → I take the proceeds and can potentially start the Wheel again.

🎡 This is why I call it my Gold Wheel Strategy: I am trying to keep the process moving rather than relying on a single bullish prediction.

⸻

🏁 Part 1 Conclusion: My Goal Is to Make Gold Work Harder

🥇 My goal isn’t simply to predict whether gold will rise tomorrow. My goal is to create a systematic process around an asset I am willing to own.

💰 With my example, selling the IAU $80 put for $0.59 gave me an effective purchase price of $79.41 if assigned.

📞 If assigned, the next stage is selling covered calls against my 100 shares.

🎡 If those shares eventually get called away, I can potentially return to selling cash-secured puts.

🐶 That is the Wheel: put premium → ownership → call premium → possible assignment → repeat.

⚠️ The important part is discipline. I must be prepared for assignment, prepared for the underlying to fall, and prepared to give up some upside when selling covered calls.

💎 For me, the strategy is less about trying to predict the exact top or bottom of gold and more about having a predefined plan for different market outcomes.

📊 Short FA: IAU vs SLV vs GDXU

🥇 IAU — Gold exposure: IAU is designed to reflect the price of physical gold bullion and currently has a 0.25% sponsor fee. It is the cleanest of these three for someone whose main thesis is simply that gold itself will rise.

🥈 SLV — Silver exposure: SLV is designed to track the price of silver bullion and has a 0.50% sponsor fee. Silver has both precious-metal characteristics and significant industrial demand, so its fundamental drivers differ from gold. That can make SLV more volatile and give it a different cycle from IAU.

🚀 GDXU — leveraged gold miners: The U.S.-listed GDXU is not the same thing as owning physical gold. It is a MicroSectors/BMO 3× leveraged ETN linked to an index built from gold-miner ETFs, with leverage resetting daily. The issuer explicitly says it is designed as a daily trading tool rather than a buy-and-hold investment.

🐶 My simple ranking for the Wheel: For the strategy described in Part 1, IAU is the most straightforward underlying because my thesis is directly tied to gold. SLV can be considered when I specifically want silver exposure. GDXU is a completely different risk category because of its 3× daily leverage, financing costs and daily reset, so I would not treat it like IAU for a traditional Wheel strategy.

📌 One important ticker warning: there is also a TSX-listed Canadian GDXU that is a different product, so when discussing GDXU, I am referring here to the U.S.-listed MicroSectors Gold Miners 3X Leveraged ETN. 

Find out more here: TigerTrade