P/E Ratio Filter: Avoid Selling Puts on Junk Stocks
Use the P/E Ratio filter to avoid selling cash-secured puts on overvalued or unprofitable companies. A simple fundamental safety net for the wheel.
Why P/E matters for option sellers
The wheel strategy requires you to be willing to own the underlying. If a put gets assigned, you wake up holding 100 shares. P/E is a simple sanity check on whether you'd want to.
- Low P/E (5–15) — value-priced. Often paired with elevated IV.
- Mid P/E (15–25) — typical large cap range.
- High P/E (25–50) — growth premium baked in.
- Very high P/E (50+) or N/A — speculative or unprofitable. Tread carefully.
Where to find it
The P/E Ratio filter is in the sidebar of both screeners with a 0–100 range slider.
Recommended ranges
| Style | P/E range | Notes |
|---|---|---|
| Value-tilted wheel | 0 – 25 | Avoids growth-bubble names |
| Standard | 0 – 50 | Includes most large caps |
| Growth-tolerant | 0 – 100 | Includes most names |
| Show everything | 0 – 100+ | Default |
The filter excludes stocks with negative P/E by default (because P/E is undefined for losses). If you intentionally want to include unprofitable names, you'll need to bypass this filter.
A simple recipe
You want CSPs only on profitable, reasonably-priced companies:
- Open the Put screener.
- Set P/E Ratio to 0 – 30.
- Set Market Cap ≥ 10B (filter via Large Cap preset).
- Set Delta to −0.30 to −0.15.
You're now screening earnings-positive, mid-to-large-cap names with reasonable valuation.
Common mistakes
1. Treating high P/E as automatically bad. NVDA and TSLA spent years at high P/E and rewarded shareholders. P/E is a risk lens, not a verdict.
2. Forgetting sector context. A 30 P/E is normal for tech, expensive for utilities. Pair P/E with Sector filter for context.
Where to go next
- Layer with Market Cap filter for size.
- Try Large Cap preset for blue-chip wheels.
- Add Sector filter for industry context.
Frequently Asked Questions
Should I avoid wheel trades on stocks with no P/E?
Stocks without a P/E are usually unprofitable (negative earnings). They're not automatic skips — biotechs, pre-revenue tech, and turnarounds can be valid wheel candidates — but require deeper fundamental review.