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Module 6 Quiz — Portfolio & Risk Management

5 questions · course capstone. Complete after Module 6.

Q1. The Omega concentration rule per single ticker is:

  1. ✓ Maximum 20% of total capital per any one wheeled ticker
  2. Maximum 50% per ticker if it's a Dividend Aristocrat
  3. No limit — concentration boosts returns
  4. Maximum 5% per ticker for maximum diversification
20% caps single-name blowup risk. A 40% overnight drop on a 20% position = 8% portfolio hit. Painful but survivable.

Q2. What should you do FIRST when a broad market drawdown hits (VIX spikes, everything drops 10%+ in a week)?

  1. Close all positions to preserve capital
  2. Sell more puts immediately to capture the elevated IV
  3. ✓ Nothing dramatic — follow your existing rules, use your cash cushion for planned adds only when volatility peaks
  4. Switch to buying puts as market protection
Panic-closing during drawdowns locks in maximum losses. The elevated IV eventually crushes back to normal, which mechanically works in the seller's favor.

Q3. Correlation risk in a wheel portfolio means:

  1. ✓ Multiple positions that move together in the same direction, giving false diversification
  2. When your trades correlate with the broker's recommendations
  3. When two puts have similar strikes
  4. When positions correlate with your income schedule
Owning 5 big-tech names isn't diversification — they move together in tech selloffs. Real diversification requires positions across uncorrelated sectors (staples, financials, healthcare, defensive).

Q4. In a taxable US brokerage account, wheel premium (from puts and calls that expire worthless) is taxed as:

  1. ✓ Short-term capital gains — always
  2. Long-term capital gains if held over a year
  3. Qualified dividend income
  4. Tax-free income
Option premium never gets long-term treatment. It's always short-term / ordinary income rates. Budget 25–35% for taxes depending on your bracket.

Q5. What's the single biggest predictor of long-term wheel success?

  1. Highest possible option-selling volume
  2. Timing market entries perfectly
  3. ✓ Consistently following your own written rules over months of quiet execution
  4. Access to the highest-IV underlyings
Mechanical rule-following beats improvised brilliance. The wheel is a compounding game — consistency compounds; brilliant one-off trades don't.