Wheel Strategy in a Bull Market: The Underperformance Trap and How to Handle It

Bull markets are the wheel strategy's weakest environment. Buy-and-hold outperforms because share appreciation dominates. Covered calls cap upside repeatedly. IV is low, meaning less premium. Every friend chasing NVDA to 400% is telling you their story. Wheelers who abandon strategy during bulls to chase the rally then get crushed in the next bear are the most common cautionary tale. This guide walks through the honest playbook for wheeling through raging bull markets.

1. Why bull markets hurt wheelers

• Covered calls cap upside — stocks rally past strikes, you miss gains
• Low IV means less premium — bull markets have compressed volatility
• Rolling CCs for credits gets harder — always chasing rallies
• Assignments happen at "wrong" levels — stocks called away right before rallies continue
• FOMO pressure — everyone else's buy-and-hold portfolio is up 40%
• Small premium feels irrelevant vs 20-30% capital appreciation available

2. The math on wheel vs buy-hold in bulls

On $100 stock over 12 months in a bull market that gains 30%:

Wheel loses ~17% of gains in raging bull markets. This is the trade-off — wheel wins in flat/down markets but loses in raging bulls. Over multi-year cycles, wheel wins on risk-adjusted basis (Sharpe ratio) even if it loses absolute returns during bull runs.

3. The psychology trap — FOMO abandonment

The dangerous pattern:

1. Bull market rages for 12-18 months
2. Wheel underperforms visibly — everyone else's portfolios up more
3. Wheeler starts questioning strategy
4. Abandons wheel, buys individual growth stocks at highs
5. Bear market hits
6. Individual stocks crash
7. Wheeler who would have made it through with wheel gets crushed

The tragic truth: most people abandon the wheel at exactly the wrong time — right before the strategy's advantage returns. Bear market recovery is where wheel outperforms buy-and-hold most.

4. Adjustments that help in bull markets

Bull market adjustments that maintain strategy while reducing pain:

1. Sell CCs at higher deltas below current price — 0.15-0.20 rather than 0.20-0.25
2. Sell CCs at longer DTE — 45 days rather than 30, gives room for pullbacks
3. Consider not selling CCs on every position — leave some uncapped
4. Roll aggressively up-and-out when stocks rally
5. Focus on higher IV names — some sectors still have premium even in bulls
6. Accept some CC assignments — cash freed up for new opportunities

5. Delta and strike adjustments

Standard wheel: 0.20-0.25 delta CCs. Bull market adjustment:

• Move CC delta to 0.15-0.20 — gives more upside room
• Move CC strikes further OTM — 5-8% above current price rather than 3-5%
• Trade-off: less premium (~30-50% less)
• Benefit: less capping of upside

This trades near-term premium for participation in continued rally. Reasonable in strong bull environments.

6. Ticker selection in bulls

Some tickers still have wheel-viable premium during bulls:

• High-IV growth names (NVDA, TSLA, AMD) — still elevated even in calm markets
• Cyclical stocks with news — earnings, guidance provide temporary IV
• Post-selloff names — even in bulls, individual names get hit
• Sector rotation opportunities — laggard sectors periodically have IV spikes
• Consider more sector rotation — don't wheel S&P if S&P is stretched

7. When to keep doing exactly what you were doing

Not every bull market requires adjustments. Consider NOT adjusting when:

• You're in accumulation phase and consistent income matters most
• You're near retirement — preservation > growth
• Your total portfolio has non-wheel investments capturing upside
• Bull market feels frothy/late-stage — could reverse quickly
• You'll be tempted to abandon strategy entirely — inconsistency is worse than underperformance

The core principle: the wheel's advantage compounds over full cycles. Any single 12-month period may show wheel underperforming buy-and-hold. Multi-year annualized returns typically show wheel winning on Sharpe/drawdown metrics even when losing on absolute returns.

8. Next steps

1. Accept underperformance during bull markets is normal
2. Focus on Sharpe ratio, not absolute returns
3. Consider modest adjustments (higher deltas, longer DTE)
4. Do NOT abandon strategy for FOMO
5. Track your multi-year returns — the wheel wins over full cycles
6. Read Bear Market playbook for the opposite environment

For real weekly wheel trades I run through all market environments, the Omega Membership shares the trade plan. Or grab the free Starter Kit.