> ## Documentation Index > Fetch the complete documentation index at: https://docs.bigdipperoptions.com/llms.txt > Use this file to discover all available pages before exploring further. # Wheel Module 2 — Selecting Candidates > How to pick stocks for the wheel: ownability, liquidity, IV tension, delta, DTE, events, regime, and sizing—with a printable cheat sheet. **Learn** · **Wheel · Step 3 of 5** · [Learn home](/learn/overview) · **Prev:** [Module 1](/learn/wheel-module-1-foundations) · **Next:** [Module 3](/learn/wheel-module-3-execution) **Est. time:** \~60–75 min *** ## New terms (Module 2) | Term | Plain meaning | | - | - | | **Liquidity** | Enough buyers/sellers that you can enter and exit without huge price gaps | | **Open Interest (OI)** | How many open contracts exist—more usually means easier trading | | **Bid / ask / mid** | **Bid** = best buyer price · **Ask** = best seller price · **Mid** = midpoint (reference only, not your fill) | | **Bid–ask spread** | Ask minus bid—wider spread = more cost to enter or exit | | **IV (implied volatility)** | How much the market expects the stock to move—higher IV often means higher option premium | | **Delta** | Rough guide to how much the option price moves with the stock—and how likely assignment feels | | **Days To Expiration (DTE)** | How many days until the option expires—pick a default range and stick to it | | **Regime** | The broader trend or volatility backdrop (grind up, range, stress)—context, not a forecast | *** ## Learning goals After this module you can screen a ticker and **reject** it for clear reasons—not only because “the premium looks good.” *** ## 1. Rule #1 — Would you own the stock? If getting assigned shares would panic you, **do not sell the put**. Ask yourself: * Would I hold 100+ shares if the price dropped 20–40%? * Do I understand the business enough to not panic-sell overnight? * Is this money I can leave tied up for months? **Premium is not a reason to ignore this.** *** ## 2. Good company ≠ good wheel stock A strong brand or story does **not** make a good wheel name. | Great company traits | Wheel-candidate traits | | - | - | | Innovative, popular, high growth narrative | Liquid options, manageable gap risk | | “Everyone knows it” | Spreads tight enough to enter/exit | | Exciting upside stories | You accept owning it at *this* strike | **Example:** **TSLA** can be a great trading vehicle and still be a **poor wheel candidate** for many accounts—wide moves, narrative gaps, and options behavior that can overwhelm casual income sizing. **Practice:** “I like the stock” is not the same as “I will sell a cash-secured put here.” *** ## 3. Can you trade it cleanly? Check **open interest (OI)**, volume, and **bid–ask spread** before any ticker. Why it matters: * Wide spreads tax every entry, roll, and close * Thin open interest (OI) → harder exits when you need them most * Poor liquidity turns a small mistake into large slippage **Practical bar:** prefer names where front-month options have meaningful OI and spreads that are small relative to the credit you collect. On the [Wheel page](/dashboard/wheel-page-guide) (covered in the execution step), sort the CSP table by **Spread %** and **OI** after you filter. *** ## 4. IV and premium — the core tension | Side of the tension | Meaning | | - | - | | **Elevated IV → richer premium** | Attractive for option sellers *today* | | **Elevated IV → riskier backdrop** | Market expects larger moves; **after assignment**, stock risk can dominate | Do not treat rich premium as a green light. Ask: “If I own shares tomorrow, is this IV telling me the stock is calm—or stressed?” **On BigDipperOptions:** IV is part of the composite **[score](/introduction/what-is-score)**—use score to compare strikes here first.\ **At your broker:** confirm **live IV** and quotes before you sell. More context: [Volatility Indicators](/volatility/volatility-indicators). GEX context is covered in the execution step. *** ## 5. Delta and assignment probability Delta on a short put is a rough **assignment-probability proxy** (not a guarantee). * Higher |delta| → more credit, higher chance of ending in shares * Lower |delta| → less credit, more “expire OTM” outcomes **Wheel thinking:** higher-delta puts invite Phase B more often—so ownability and sizing must be stricter. *** ## 6. Pick a time window (days to expiration) | Style | DTE range | Trade-off | | - | - | - | | **Weeklies** | \~5–14 days | Faster feedback, frequent credits; more check-ins | | **\~15–30 days** | Common wheel band | Balance of time decay and flexibility | | **Monthlies / longer** | 30+ days | Fewer decisions; capital tied up longer | Pick a **default DTE band** and break it only with a written reason (earnings, liquidity, etc.). *** ## 7. Strike selection framework Work top-down: 1. **Max price I’d pay for shares** (hard cap) 2. **Price / structure context** (range, support—walls on the Wheel page in the execution step) 3. **Delta / credit** that still respects (1) 4. **Liquidity at that strike** Never pick a strike only because “the credit looks nice.” *** ## 8. Earnings, dividends, and binary events * **Earnings:** IV crush vs gap risk—many wheel processes go **flat** into the print * **Dividends:** short calls can face early assignment risk around ex-div * **Biotech / binary catalysts:** can invalidate income assumptions in one session **Default for beginners:** do not open a new put if **earnings** or a major event falls before expiry—unless your plan explicitly accepts assignment through that event. *** ## 9. Trend / regime awareness | Environment | Wheel research posture | | - | - | | **Bullish grind** | Puts may expire more often; watch FOMO on covered calls later | | **Sideways / range** | Often friendliest for short premium *if* liquidity and events cooperate | | **Bearish / stress** | Premium looks rich; assignment + continued downside can stack losses | Use [Stock Price History](/optionschain/stock-price-history) and GEX/regime views on the platform as **context**, not prediction. *** ## 10. Size each stock small Define a **max % of wheel capital** per ticker (and per correlated group). One oversized name that gaps down can: * Wipe months of premium * Force panic selling of shares * Freeze capital so you cannot rotate into better setups * Push you into revenge sizing on the next ticker **Prefer:** many modest, liquid, ownable positions over one “hero” credit. *** ## Cheat sheet (print this) ```text theme={null} 1. Would I own shares at this strike in a big drop? NO → REJECT 2. Good company ≠ good wheel: is this a wheel name? NO → REJECT 3. Enough OI and tight enough spread? NO → REJECT 4. IV rich because of stress/binary I won't hold? YES → REJECT or wait 5. Delta matches how often I'm OK being assigned? NO → adjust or REJECT 6. DTE fits how often I want to manage? NO → adjust or REJECT 7. Earnings / div / binary inside the window? YES → flat or REJECT 8. Regime compatible with my plan? NO → REJECT or size down 9. Size ≤ my per-ticker capital cap? NO → cut size or REJECT 10. Still interested after saying risks out loud? NO → REJECT ↓ Next — [Wheel Page Guide](/dashboard/wheel-page-guide) ``` *** ## Checkpoint * [ ] I rejected at least one famous name for a wheel reason * [ ] I can explain why higher option premium can mean a riskier stock if I get assigned shares * [ ] I wrote my per-stock size cap and default DTE band **Next:** [Module 3 — Executing with BigDipperOptions](/learn/wheel-module-3-execution) This documentation is built and hosted on [Mintlify](https://mintlify.com), a developer documentation platform.