On August 26, 2020, we sold another bull put credit spread on AAL stock with expiry in the next 30 days.
Here is our trade setup:
- BOT 1 AAL SEP 25 '20 - 11.5 + 10.5 Put Bull Spread -0.26 USD
For this trade, we got a premium of 21.20 USD (after commissions) or 1.84% potential income return in 30 days.
These trades come as the #52 and #53 in the month of August, and if we stick with our trading plan for this month, the premium generated from this trade makes us about 2.82% from our $750 monthly goal, while in total we have already reached 117.46% from our monthly goal so far.
What happens next?
On the expiry date (September 25, 2020) AAL is trading above $11.5 per share - options expire worthlessly and we keep premium - if AAL trades under $11.5 on the expiry date, we get assigned.
But as we already have collected a premium of 0.22 per share, our break-even price for this trade then is $11.5-$0.19 = $11.29
In other words, AAL can fall from the current price of $13.30 down to $11.29 and we will still be break-even
As we are selling credit spread here, in case AAL suddenly drops bellow our second bought put at the strike price $10.5 it will help to mitigate risk, in other words - selling credit spreads has some advantages.
- Running Total 10 Trades since July 10, 2020
- Options income: $107