The .20 Delta — Conservative Income

The .20 delta strike is the conservative end of the wheel trader's spectrum. Selling a put at this level means you are choosing a strike with approximately an 80% probability of expiring out-of-the-money. You trade premium size for a high win rate and a larger margin of safety before assignment kicks in.

Real-World Example

AAPL is trading at $185. The 30-DTE put chain shows: $175 strike = -.20 delta, premium = $1.45. That strike is 5.4% below the current price. You collect $145 per contract, and AAPL must fall more than $10 before you face assignment. Your breakeven is $173.55.

Win rate: ~80% of trades expire worthless (you keep full premium)
Typical premium: 0.5%-1.0% of the strike price per month
Annualized yield: 6%-12% on committed capital (before compounding)
Distance from current price: usually 5%-10% OTM depending on IV

When to Use the .20 Delta

This delta shines when implied volatility is elevated (VIX above 20) because the premium is still meaningful even at a conservative distance. It is also the right choice for your largest positions, high-conviction long-term holdings you would be happy to own but prefer to buy at a significant discount, and market environments where you sense risk but still want to stay active.

The Tradeoff

At .20 delta, your monthly premium may only be $0.50-$1.50 per share. On a $10,000 capital commitment, that can feel underwhelming. The math works over dozens of trades, but impatient traders often drift toward higher deltas prematurely. Stick to your plan.

Approximate Monthly Yield (.20 Delta)

Monthly Yield = Premium / Strike Price ≈ 0.5% to 1.0%

The .20 delta is your defensive posture. Experienced wheel traders often allocate 40%-60% of their cash-secured put capital to this level, reserving higher deltas for smaller, more opportunistic positions.

Key Takeaways

•.20 delta ≈ 80% chance of keeping full premium
•Best for large positions, elevated IV, and uncertain markets
•Expect 0.5%-1.0% monthly return on committed capital
•Use this delta for your core, bread-and-butter income trades

Quick Check

1/2

You sell a .20 delta put on MSFT with 30 DTE. Roughly how often will this trade expire worthless?

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