What do you get when you combine the betting system of blackjack with the wheels of roulette? The Money Wheel!
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This game is quite simple. All you have to do is spin the wheel and then guess where the wheel will land. It’s somewhat similar to roulette in this way. The only difference is that the betting system is much more similar to blackjack. The Money Wheel is definitely a fun new addition to many online casinos, and will give you an interesting and new way to gamble.
If you’ve heard all the fuss about this game, but haven’t tried it yet, you really don’t know what you’re missing out on.
Play Money Wheel Game
How the Game Works
The Money Wheel is similar to a roulette wheel; however, the wedges are separated so that some symbols take up more wedges than others. For example, there are more wedges with a ‘1’ sign on them than a ‘3’ sign on them. Similarly, there’s more signs with a ‘3’ on them than a ‘5’ on them. You have 7 options to choose from. They include:
- a red dragon sign, which pays out 45 to 1 as there is only 1 red dragon wedge on the wheel
- a golden lotus sign, which also pays out 45 to 1 as there is only 1 of them on the wheel
- 20, which pays out 20 to 1
- 10, which pays out 10 to 1
- 5, which pays out 5 to 1
- 3, which pays out 3 to 1
- 1, which pays out 1 to 1
The odds are determined based on how often the signs or the numbers appear on the wheel. You can bet on as many positions as you’d like and you can bet as much as you’d like. If the wheel lands on the wedge that you’ve bet on, you will win the payout. If it lands on a wedge that you didn’t bet on, you will lose all of the bets that you’ve made.
How to Place a Bet
The betting table looks similar to a blackjack betting table with each position reserved for a sign. When playing Money Wheel for free and with real money, you can place a minimum bet of 1.00 credit or €1.00 on each position. Bets are capped at a maximum of 100.00 credits or €100.00. You have 5 different chips to play with. Their denominations include 1, 5, 10, 25 and 100. When betting real money on this game, the chips should state your currency.
Game Design and Odds
The Money Wheel is quite a beautiful table game to play. You’ll be taken to a standard blackjack or poker table with a huge wheel in the background. Once you’re comfortable with the bets you’ve made, just hit ‘Spin’, and the game will do everything for you. To make your life easier, there’s also a ‘Rebet’ option that will automatically make the same bets for you as your last spin.
The expected return to player (RTP) of the Money Wheel varies quite a bit. The minimum RTP is expected to be about 80.77% while the maximum RTP is expected to be about 92.31%. On average, the RTP should fall somewhere close to 88.46%. With these odds, hitting the jackpot won’t be easy.
Overall Verdict
The Money Wheel is a fairly simple game that doesn’t require a lot of thinking. All you have to do is place your bet and then spin the wheels. It’s mostly a game of luck. Still, many players seem to enjoy taking a spin on the Money Wheel
The Wheel Strategy is a systematic and very powerful way to sell covered calls as part of a long-term trading strategy.
The process starts with a selling a cash secured put. The investor also needs to be willing, and have the funds available to purchase 200 shares.
After selling the initial put, the put either expires or is assigned. If it expires, they keep the premium and start again if they are still bullish on the stock, or they move on to another stock. If they are assigned, they take ownership of 100 shares.
At this point they sell a call to turn it into a covered call and they also sell a new put.
From here, if the stock goes up through your call, you are assigned and the stock is called away leaving you flat. As the stock went up, your sold put expires worthless.
If the stock goes down, you are assigned on the second put, and you now have your full allocation of 200 shares. As the stock went down, the call expires worthless.
Now that you own 200 shares, you sell two calls.
If the stock goes up through the calls, the stock is called away and your position is flat again.
Money Wheel Game
Through the process you have collected 5 option premiums, plus any dividends while holding the shares, plus potentially some capital gains, depending at which strikes you sold the calls and puts.
If the stock continues down, you can continue to sell 2 covered calls each month.
This process is best explained in the following diagram:
This is just the theory of course, and in practice, things don’t always work out so smoothly.
One trap investors can fall in to is continuing to hold on to shares as the stock falls due to the attraction of generating option premium.
Stop losses are important. Have a think how this strategy would have performed on a stock like Lehman Brothers during the Financial Crisis.
If a stock has dropped 10%, it might be time to cut and run. You don’t want to keep adding to a losing position by buying more shares. In this case what can happen is that you end up selling calls for less than your cost basis, meaning that even if your stock goes up through your calls, you are still left with a loss.
Here are some things you might want to consider when looking at this strategy:
- Sell the first put when implied volatility is in the higher end of the 6-month range
- Wait for a 5% pullback before selling the first put
- Place a stop loss 10-15% below where the stock was trading when the put was first sold
- Adjust your stop loss lower when multiple puts have expired worthless
- Will you sell the first put slightly out-of-the-money or at-the-money?
- Will you sell the calls slightly out-of-the-money or at-the-money?
- Sell the first put when RSI is below 30
- Stick to low beta, high dividend stocks. Think of stocks you would be happy to own in your retirement account
- You can also use this strategy on ETF’s to reduce the bankruptcy risk
- If the stock continues to fall, it’s ok to sell a call below cost only if you have received enough put premiums to offset the cost basis
- If you have sold numerous puts, your actual cost basis can be very low
THEORETICAL EXAMPLE
Let’s look at a theoretical example to see exactly how the strategy works and then I’ll share some trades from my own account.
In April, 2014 JNJ was trading at $98.
We start by selling a June $95 put for $1.50.
JNJ then falls below $95; we are assigned on the put and take ownership of 100 shares with a cost basis of $93.50 (95 less the 1.50 option premium).
Now we sell an October $97.50 Call for $1.50 and an October $90 Put for $1.50.
So far we have received a total of $450 in option premium (3 x $150) and we have paid $9,500 for the 100 shares. The cost basis is $9,050 or $90.50 per share.
As October expiry, JNJ falls below $90. We are assigned on another 100 shares at $90.
We now sell two January $95 calls for $1.50.
We have been assigned on the shares at $95 and $90 totaling $18,500.
We’ve received 5 x $150 in premium from call and put sales.
Money Wheel online, free
Our net cost basis is $17,750 or $88.75 per share.
If JNJ is below $95 at January expiry, we sell two more calls and continue to collect the dividends.
If JNJ is above $95, our 200 shares are called away leaving our position flat. The total profit is $95 – $88.75 x 200 = $1,250.
Not bad for a stock that has fallen from $98 to $95 over the course of the trade.
TWO REAL TRADE EXAMPLES
The following is an example that I like to share with coaching clients. It’s a good example because it occurred during the 2008-2009 financial crisis. On a stock that dropped 42%, I made a profit of $1,440.
However, I was lucky, and at one point I was in a pretty big hole. Realistically I should have been stopped out of the trade in mid to late 2008 but I stuck with it and rode it out. If someone tried this on Bear Sterns, Lehman Brothers or AIG, they wouldn’t have been so lucky.
Here is the trade history. You can see that I started the trade via a covered call on GE when it was trading at $31.98.
Over the course of the trade I bought stock as follows:
100 shares at $31.78 in April 2008
100 shares at $26.57 in July 2008 average cost now $29.18
200 shares at $8.95 in February 2009 average cost now $19.06
200 share at $16.00 in December 2009 average cost now $18.04
In total I generated $981.28 in option premiums after commissions and received $342.30 in dividends after tax.
To close the trade, I ended up buying back the $18 calls in December 2010 and selling the shares for $18.32.
All up the trade made a profit of $1,440 while the stock declined by 42% over the course of the trade.
Even though I’ll freely admit the trade wasn’t managed very well, you can see how powerful this strategy can be.
Here is another trade example that worked out a little more smoothly than the GE trade.
You can see that in this case, EWZ rose by 6.03% over the course of the trade.
The profit on the wheel trade was $438 on capital at risk of $6,200 which equates to a 7.08% return.
The wheel strategy is a really powerful income strategy that can enhance your long-term returns. There are risks and it’s important that investors are careful not to get sucked in to averaging down on losers.
Wheel trades can be very straight forward as we saw in the EWZ example, or they can be very painful and tie up capital for a long time as we saw in the GE trade.
What do you think about this strategy? Let me know in the comments below.