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The wheel on SoFi: a big premium, and the gap that comes with it
SoFi draws wheel sellers because its share price is low and its premiums look large for the cash set aside. Those premiums are large because the stock moves a lot, especially around earnings, and there's no dividend to soften a fall. Here's a made-up cycle where a report gaps the stock down.
What SoFi is like for a wheel seller
SoFi Technologies (SOFI) is a US financial company that offers loans, banking and investing, and it holds a bank charter. For the wheel strategy, what stands out:
- High Implied volatility. The stock has made large moves in both directions, and its options are priced for more.
- No dividend. If you're assigned, there's no payment coming while you wait for a recovery.
- Earnings gaps. Like many growth names, it can move sharply the morning after a report.
- A share price that has mostly sat far below the big tech names, so one contract fits smaller accounts. Check today's price.
- Busy options with strong retail interest. Spreads are usually workable at common strikes; check yours.
Nothing on this page is a recommendation. SoFi is here because people search for it, and because it's a clear case of a premium that looks rich because the risk is.
Why the premium looks so good
On a calm, large company, a put a bit below the price might pay a small slice of the cash set aside. On a high-IV stock, the same distance can pay several times more.
That's not a bargain. It's the market's price for bigger expected moves. Ask what move the premium is paying for. Why high premium is a warning and the expected move, explained show how to read it.
Account note: in Canada, covered calls are widely allowed in a TFSA or RRSP, while cash-secured puts depend on the broker. Options permissions differ by broker, so check yours.
A cycle where earnings gap it down (an illustration, not a trade idea)
These numbers belong to a made-up high-volatility fintech, XYZ. They are not SoFi's prices.
Step 1: the put. XYZ trades at $20. Earnings are due in two weeks. You sell a 30-day $18 put for $0.90 and collect $90, well above what a calm stock would pay. Your broker sets aside $1,800.
Step 2: the gap. The report disappoints. XYZ opens the next morning at $14, a 30% gap. It's still there at expiry. You're assigned at $18. Running cost: $18 − $0.90 = $17.10. You're $310 behind.
Step 3: the first call. You want to sell above your cost. A 30-day $18 call pays $0.15 ($15). You take it. XYZ drifts to $13. The call expires. No dividend arrives.
| Item | Amount |
|---|---|
| Put premium | +$90 |
| Call premium | +$15 |
| Dividend | $0 |
| Shares: bought at $18, now $13 | −$500 |
| Where you stand | −$395 |
The put's big premium covered less than a quarter of the gap. That's a math example, not a promise.
The choices from here, with numbers
You hold 100 shares at $13. Your running cost is $16.95. Three paths, none of them free.
| Choice | If XYZ goes to $16 | If XYZ goes to $11 |
|---|---|---|
| A: Sell the shares now at $13 | −$395 locked in | −$395 locked in |
| B: Sell a $15 call for $0.40 | Called at $15: −$155 | Call expires: −$555 |
| C: Keep selling $18 calls for pennies | Still holding: −$95 on paper | Still holding: −$595 on paper |
- A ends it. You take the loss and free the cash.
- B collects more now, but caps you at $15, below your $18 purchase. If XYZ recovers fast, you lock in a loss at the strike. See the strike-below-cost trap.
- C waits for a full recovery. From $13, XYZ needs a 38% rise just to reach $18.
There's no choice that makes the gap go away. The decision is which risk you'd rather hold.
The rule for next time
- Check the earnings date first. If a report falls inside the expiry, the big premium is mostly paying for that night. Decide if you'd accept a 30% gap.
- Size for the gap, not the premium. On a high-IV stock, test your size against a 30% to 40% drop. See sizing math, the full obligation rule.
- Remember there's no dividend. On a stock like this, the only money coming in while you wait is call premium, and after a gap it's small.
- Ask if you'd own it. If you'd sell the shares the moment you're assigned, you're not wheeling. You're betting on the report.
- Keep high-IV names a small part of the book. The wheel on Palantir shows the same pattern at a larger price.
In plain words: a high premium on a jumpy stock is fair pay for a jumpy stock. It doesn't protect you from the jump.
Questions
Is SoFi good for the wheel strategy?
It's popular because of its low share price and high premiums. It's also volatile, pays no dividend, and can gap on earnings. Whether it suits you depends on whether you'd hold it through a sharp drop. Nothing here is a recommendation.
Why are SoFi's option premiums so high?
Because implied volatility is high: the market expects big moves. Higher premiums are payment for that risk, not extra profit.
Should I sell SoFi puts before earnings?
That's an event bet. If the stock moves less than priced, the premium shrinks quickly afterward. If it gaps past your strike, the loss can be several times the premium. Many sellers skip the earnings window on high-IV names.
What do I do if I'm assigned on SoFi after a gap down?
You can sell the shares, sell calls below your cost, or hold and sell calls above it for small premiums. Each has a cost. Work out each one in dollars before choosing, and see assigned shares, what now.
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