Credit Spread on Energy Transfer (NYSE:ET) – 2.4% potential income return in 31 days / 28.25% annualized

On November 10, 2020, we sold 2 bull put credit spreads on Energy Transfer (NYSE:ET) stock with an expiry set in the next 31 days. For this trade, we get a premium of $36 (before commissions)

Energy Transfer Partners (now legally Energy Transfer Operating L.P.) is a company engaged in natural gas and propane pipeline transport. It is organized in Delaware and headquartered in Dallas, Texas. It was founded in 1995 by Ray Davis and Kelcy Warren, who remains Chairman and CEO. It owns a 36.4% interest in Dakota Access, LLC, the company responsible for developing the controversial Dakota Access Pipeline.

Here is our trade setup:

  • BOT 2 ET DEC 11 '20 - 5.5 + 5 Put Bull Spread  -0.18  USD  

For this trade, we got a premium of 26.4 USD (after commissions) or 2.4% potential income return in 31 days.

These trades come as the #7 and #8 in the month of November, according to our trading plan for this month, the premium generated from this trade makes us about 5.86% from our $450 monthly goal, while in total we have already reached 24.04% so far.

What happens next?

On expiry date December 11, 2020, ET is trading above $5.5 per share -  options expire worthlessly and we keep premium - if ET trades under $5.5 on the expiry date, we get assigned.

But as we already have collected a premium of 0.13 per share, our break-even price for this trade then is $5.5-$0.13 = $5.37

As we are selling credit spread here, in case ET suddenly drops below our second bought put at the strike price of $5 it will help to offset some risk, in other words - selling credit spreads has a lot of advantages.

Selling credit spreads with ET stock
Selling credit spreads with ET stock
  • Running Total  32 Trades since April 6, 2020

  • Options Income: $404