Credit Spread on BCRX – 7.3% potential return in 29 days

On August 20, 2020, we sold a bull put credit spread on BCRZ stock with expiry in the next 29 days.

Here is our trade setup:

  • BOT 1 BCRX SEP 18 '20 - 4 + 3 Put Bull Spread  -0.34  USD  

For this trade, we got a premium of 29.2 USD (after commissions) or a 7.3% potential income return in 29 days.

These trades come as the #40 and #41 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 3.89% from our $750 monthly goal, while in total we have already reached 78.56% from our monthly goal so far.

What happens next?

On expiry date (September 18, 2020) BCRZ is trading above $4 per share -  options expire worthlessly and we keep premium - if BCRX trades under $4 on the expiry date, we get assigned.

But as we already have collected a premium of 0.29 per share, our break-even price for this trade then is $4-$0.29 = $3.71

In other words, BCRX can fall from the current price of $4.34 way down to $3.71 and we will still be break-even

As we are selling credit spread here, in case BCRX suddenly drops bellow our second bought put at the strike price $3 it will help to mitigate risk, in other words - selling credit spreads has some advantages

Selling credit spreads with BCRX stock
Selling credit spreads with BCRX stock
  • Running Total  14 Trades since April 30, 2020
  • Options income: $412