Credit Spread on Macy's (NYSE:M) –2.21% potential income return in 17 days / 47.45% annualized

On October 27, 2020, we sold a bull put credit spread on M stock with an expiry set in the next 17 days. For this trade, we get a premium of $19 (before commissions)

M stands for Macy's, Inc.  -  an American holding company founded by Xavier Warren in 1929. Upon its establishment, Federated held ownership of the regional department store chains Abraham & Straus, Lazarus, Filene's, and Shillito's. 

Here is our trade setup:

  • BOT  1  M  NOV 13 '20 - 6.5 + 6 Put Bull Spread  -0.19 USD 

For this trade, we got a premium of 14.4 USD (after commissions) or a 2.21% potential income return in 17 days.

These trades come as the #38 and #39 in the month of October, according to our trading plan for this month, the premium generated from this trade makes us about 2.4% from our $600 monthly goal, while in total we have already reached 88.59% so far.

What happens next?

On expiry date November 13, 2020, M is trading above $6.5 per share -  options expire worthlessly and we keep premium - if M trades under $6.5 on the expiry date, we get assigned.

But as we already have collected a premium of 0.14 per share, our break-even price for this trade then is $6.5-$0.14 = $6.36

As we are selling credit spread here, in case M suddenly drops below our second bought put at the strike price of $6 it will help to mitigate risk, in other words - selling credit spreads has a lot of advantages.

Selling credit spreads with M stock
Selling credit spreads with M stock
  • Running Total  8 Trades since August 10, 2020
  • Options Income: $67