Covered Call on CRBP - Potential income return 63.21% in 50 days

On September 14, 2020, we sold 1 covered call on CRBP stock expiring on October 16, 2020. For this trade, we got a $25 premium (before commissions).

CRBP - a clinical-stage drug development company pioneering transformative medicines that target the endocannabinoid system

This trade comes as the #16 in the month of September, and if we stick with our trading plan for this month, the premium generated from this trade makes us about 2.9% from our $800 monthly goal, while in total we have already reached 27.92% this month

CRBP is much-troubled stock in our portfolio, and we actually got this stock after selling credit spreads with strike prices $6 and $5. Originally when we constructed these trades, CRBP was trading around $8.8-$9.00, but then it falls more than 70% to the levels of $1.9-$2.5 per share

Update on CRBP Credit Spreads after stock falls more than 70%

We got assigned 100 shares at $6, but as we had second bought put as protection at $5, we sold it today at $320. Our average price per share (not counting in premiums) ($600-$320)/100=$2.8

If counting in premium received, our average share price = $2.46

With CRBP trading around $1.9 today, we decided to sell October 16 covered call with the strike price set at $4

here is our trade setup:

  • SLD 1 CRBP OCT 16 '20 4 Call Option 0.25 USD

what can happen next:

CRBP is trading below our strike price of $4 at the expiry date (October 16, 2020), in such case, we keep the premium and sell more covered calls to lower our cost basis. 

In case CRBP is trading above our strike price of $4, our 100 shares get called away at the strike price of $4 and (as we have already collected some premium from selling puts in the past) we realize our max gain $177 or 63.21% potential return of income in 50 days

Break-even: $2.23

  • Running Total  9 Trades since August 27, 2020

  • Options income: $138