Happy Thanksgiving to my American readers! I hope you’re having a fantastic holiday with your family, filled with good conversation, soccer, and a moment to reflect on life’s many blessings. There truly are plenty to be thankful for.
Today, I wanted to touch on an options strategy that’s a variation of the covered strangle—something I’ve talked about quite a bit lately.
It’s called the “wheel” strategy. This approach involves selling cash-backed puts and covered calls to create income. While it generates income, it also allows you to build a long-term stock portfolio.
The strategy kicks off by selling out-of-the-money (OTM) cash-collateralized puts, bringing in some premium income. You continue this until you acquire shares of the stock at a favorable price. After that, it’s time to execute a covered call, generating more income until the stock is called away from you. Then, you simply return to selling cash-backed puts and restart the cycle.
This strategy is great for investors looking for steady income while also wanting to own quality companies.
It differs from a covered strangle in two main ways: first, you don’t start by owning the stock, and second, it merges two options strategies (cash-backed puts and covered calls) without combining them simultaneously, unlike a covered strangle.
If we were in an English class, one might say it’s a bit of a semantic issue. In essence, you’re still aiming to do the same two things: earn income and secure ownership of blue-chip stocks.
The wheel strategy tends to perform best when the expiration dates range between 28 and 60 days. I found three stocks that are ripe for unusual put option activity based on recent trends.
Have a wonderful weekend!
Weekdays (WDAY)
Weekdays (WDAY) saw eight put options unusually active yesterday, with four expiring between 28 and 60 days. Three of those were in the money, leading us to consider the January 16, 2026 put for $185.
First off, selling a $185 put isn’t going to make anyone wealthy. The yearly return is around 4.3%. That’s pretty much what you’d get from a 30-year Treasury bill right now.
The stock is down 14.1%, which is quite a drop. It hasn’t been near $185 since May 2023.
At face value, Workday stock appears steeply priced. S&P Global Market Intelligence values the company at $54.45 billion, or around 38.9 times EBITDA (earnings before interest, taxes, depreciation, and amortization). Nvidia (NVDA) is not far behind.
However, free cash flow for the last 12 months ending October 31 was $2.59 billion, giving it a free cash flow yield of 4.7%. Generally, anything between 4% to 8% is seen as fair value.
Analysts largely support it, with 28 out of 39 recommending a buy (rating it 4.36 out of 5), and a price target set at $282.18, which is significantly higher than where the stock is currently priced.
Robinhood Market (HOOD)
Robinhood Markets (HOOD) is expected to see substantial trading activity in both stocks and options. Yesterday witnessed a trading volume of 581,878 options contracts, which is about 1.6 times the 30-day average—indicative of notable unusual option activity. There were 5 calls and 4 puts, with a Vol/OI (volume to open interest) ratio surpassing 10.
None of the four puts were due between 28 and 60 days. But two did expire on December 26.
Of those, I prefer the $115 strike put. If things go awry and you must buy, you’d be buying the stock at a net cost of $111.35—13.1% OTM. Expected price movement is 12.07% up or down.
November wasn’t kind, dropping from a high of $150.47 on Halloween to a low of $102.10 by November 21. It has regained some ground this week but is still under its 52-week high of $153.86 from October.
If you sell the $115 put, you’d pocket $365 in premium income, with an annualized return of 39.9%. There’s a 77.7% chance the stock price will exceed $111.35 by expiration on Boxing Day (a note for my Canadian friends)—which makes this risk/reward scenario look pretty appealing.
Honestly, I don’t ponder Robinhood too much, but it’s undeniably a popular stock.
Over the next couple of years, revenue for the company is projected to grow 33%, from $4.51 billion in 2025 to $6.02 billion in 2027. Meanwhile, EBITDA is expected to rise by 48%, going from $2.5 billion to $3.69 billion in the same period. If that holds, the EBITDA margin in 2027 would be around 61.2%—quite a figure.
Interestingly, analysts’ responses to HOOD have been tepid. Out of 22 ratings, only 14 suggest a buy (rating it 4.09 out of 5), with a target price of $155.05, which is just 21% above the current stock price.
SoFi Technology (SOFI)
SoFi Technologies (SOFI) has taken a notable hit in 2025 but remains up 85% year-to-date. I can’t say I’m shocked by this surge. Back in July, when SOFI peaked close to $20, I shared my view on it, seeing potential for it to become a $40 stock over the long haul.
Fast forward four months, it’s up another 43% to $28.49. Barchart’s technical analysis currently suggests a strong buy in the short term.
I still admire what CEO Anthony Noto is doing with the company, though analysts appear to be more cautious. Of the 24 analysts who weighed in, only 7 rated it a buy (3.17 out of 5), with a target price of $27—beneath the current stock price.
From 2026 to 2030, SoFi’s EPS is projected to go from $0.58 to $1.26. In July, I noted that the company was trading at 155 times normalized EPS for the next year. As of now, it’s trading at 49.1 times 2026 EPS and 22.6 times 2030 EPS, according to S&P Global Market Intelligence.
It seems the multiple should drop as the company shows better-than-expected returns in the next two to three years. Now we just have to ponder whether the stock will settle at $30, $60, or perhaps $15.
In the recent unusual options activity, SOFI had four puts with a Vol/OI ratio of 1.24 or higher. Out of those, only the $26 put for January 2, 2026, had the 28-60 days to expiration.
This one is a bit tight. The OTM is only 8.7%. If risk isn’t your thing, you might want to look at a slightly lower strike price.
By selling the $26 put, you could gain $104 in premium income, with an annualized return of 41.1%. The chance that the stock price will exceed $24.96 upon expiration is around 74.2%. Expected movement is 13.2% either way—$24.73, a mere 23 cents below the break-even.
If you’re looking to add SOFI to your portfolio while employing the wheel strategy, I believe $26 is a logical choice. But again, if you’re open to some risk, considering a $23 put could be worthwhile. It offers a 16.6% annualized return, with an 85.56% chance of surpassing the break-even of $22.62 come early January.
