Credit Spread on GPS – 1.29% potential return in 21 day

On August 7, 2020, we sold a bull put credit spread on GPS stock with expiry in the next 21 days.

Here is our trade setup:

  • BOT 1  GPS  AUG 28 '20 - 12.5 + 11.5 Put Bull Spread -0.21 USD   

For this trade, we got a premium of 16.20 USD (after commissions) or a 1.29% potential income return in 21 days. 

These trades come as the #10 and #11 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 2.16% from our $750 monthly goal, while in total we have already reached 22.02% from our monthly goal so far.

So what happens next?

On expiry date (August 28, 2020) GPS is trading above $12.5 per share -  options expire worthlessly and we keep premium - if GPS trades under $12.5 on the expiry date, we get assigned.

But as we already have collected a premium of 0.16 per share, our break-even price for this trade then is $12.5-$0.16 = $12.34

In other words, GPS can fall from the current price of $14.04 way down to $12.34 and we will still be break-even

Selling Credit spreads with GPS stock
Selling Credit spreads with GPS stock
  • Running Total 15 Trades since May 1, 2020
  • Options income: $209