WSB Strategy Playbook: Covered Calls to YOLOs
Lesson 5: WSB's Greatest Hits — The Strategies
Options strategies range from "grandma's retirement portfolio" to "full degen YOLO." Here's the full menu, from sensible to suicidal.
NEUTRAL/BULLISH 1. The Covered Call
Setup: Own 100 shares + sell 1 OTM call.
Max Profit: Strike − purchase price + premium received.
Max Loss: Stock purchase price − premium received (stock goes to zero).
WSB Verdict: Boring. Reliable. The "wheel strategy" loves this. You collect premium while you hold. If called away, switch to selling puts.
BULLISH 2. The Cash-Secured Put (CSP)
Setup: Hold cash = strike × 100. Sell 1 OTM put.
Max Profit: Premium received.
Max Loss: (Strike × 100) − premium. You buy the stock at the strike.
WSB Verdict: "I want to buy the dip, but get paid to wait." Paired with covered calls = "The Wheel."
BULLISH 3. Bull Put Spread / Bear Call Spread (Credit Spreads)
Setup: Sell a put (or call), buy a further OTM put (or call).
Max Profit: Credit received.
Max Loss: Width of spread − credit received. Defined and known.
WSB Verdict: The sensible way to sell premium. High probability, defined risk. Too boring for most WSB posters.
DIRECTIONAL 4. Bull Call Spread (Debit Spread)
Setup: Buy an ITM/ATM call, sell a higher OTM call.
Max Profit: Width of spread − debit paid.
Max Loss: Debit paid. Capped and known.
WSB Verdict: Cheaper than a naked call, but caps your upside. Trains you out of the "unlimited gainz" mindset.
NEUTRAL 5. The Iron Condor
Setup: Sell an OTM put spread + sell an OTM call spread. Four legs.
Max Profit: Total credit received.
Max Loss: Width of widest spread − credit.
WSB Verdict: "I think nothing will happen." Great for range-bound stocks. High probability, managed risk. Most profitable in high IV environments where you can sell wide.
MAXIMUM DEGEN 6. The YOLO (All-In OTM Calls/Puts)
Setup: Put your entire account into far OTM weekly calls (or puts).
Max Profit: Theoretically unlimited (calls). Realistically: your screenshot hits r/wallstreetbets.
Max Loss: Your entire account. Every time. Statistically.
WSB Verdict: This is the content machine. Do not do this with money you need. The expected value is negative, the probability of profit is maybe 5-10%. But when it hits... legendary.
VOLATILITY PLAY 7. Straddle / Strangle
Straddle: Buy ATM call + ATM put. Profits if the stock moves a lot in either direction.
Strangle: Buy OTM call + OTM put. Cheaper but needs even bigger move.
WSB Verdict: The earnings play. "I have no idea which way this goes but I know it will MOVE." IV crush is the enemy — you need the move to exceed the combined premium.
Strategy Decision Matrix
| Your View | IV is Low | IV is High |
|---|---|---|
| Bullish | Buy calls, bull call spread | Sell puts, bull put spread |
| Bearish | Buy puts, bear put spread | Sell calls, bear call spread |
| Neutral | Sit on your hands | Iron condor, covered strangle |
| Expecting Big Move | Buy straddle/strangle | Calendar spread |
🧠 Knowledge Check
1. A covered call involves:
2. An iron condor profits most when:
3. A straddle is best used before: