Credit Spread on SmileDirectClub (NASDAQ:SDC) – 2.86% potential income return in 28 days / 37.28% annualized

On November 6, 2020, we sold a bull put credit spread on NASDAQ:SDC stock with an expiry set in the next 28 days. For this trade, we get a premium of $32 (before commissions)

These trades come as the #5 and #6 in the month of November, according to our trading plan for this month, the premium generated from this trade makes us about 6.04% from our $450 monthly goal, while in total we have already reached 18.18% so far.

SDC is one of our favorite stocks to trade credit spreads / covered calls on, since April 2020, this stock has made us the most options income so far.

Here is our trade setup:

  • BOT 1 SDC DEC 04 '20 - 9.5 + 8.5 Put Bull Spread  -0.32 USD 

For this trade, we got a premium of 27.2 USD (after commissions) or a 2.86% potential income return in 28 days.

What happens next?

On expiry date December 4, 2020 SDC is trading above $9.5 per share -  options expire worthlessly and we keep premium - if SDC trades under $9.5 on the expiry date, we get assigned.

But as we already have collected a premium of $0.27 per share, our break-even price for this trade then is $9.5-$0.27 = $9.23

Selling Credit Spreads on SDC stock
Selling Credit Spreads on SDC stock
  • Running Total  30 Trades since April 27, 2020
  • Options income $586