Credit Spread on SDC – 3.31% potential return in 22 days

On August 6, 2020, we sold a bull put credit spread on SDC stock with expiry in the next 22 days.

Here is our trade setup:

  • BOT 1  SDC  AUG 28 '20 - 7.5 + 6 Put Bull Spread -0.28 USD   

For this trade, we got a premium of 23.20 USD (after commissions) or a 3.31% potential income return in 22 days. Slightly bit more than a dollar per day.

These trades comes as the #8 and #9 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 3.09% from our $750 monthly goal, while in total we have already reached 19.86% from our monthly goal so far.

 

So what happens next?

On expiry date (August 28, 2020) SDC is trading above $7.5 per share -  options expire worthlessly and we keep premium - if SDC trades under $7.5 on the expiry date, we get assigned.

But as we already have collected a premium of 0.23 per share, our break-even price for this trade then is $7.5-$0.23 = $7.27

In other words, SDC can fall from the current price of $8.94 way down to $7.27 and we will still be break-even

Selling covered calls and puts with SDC stock
Selling covered calls and puts with SDC stock
  • Running Total  19 Trades since April 27, 2020
  • Options income: $418