Credit Spread on SPCE – 1.7% potential return in 30 day

On August 19, 2020, we sold a bull put credit spread on SPCE stock with expiry in the next 30 days.

Here is our trade setup:

  • BOT 1 SPCE SEP 18 '20 - 16 + 15 Put Bull Spread  -0.32  USD  

For this trade, we got a premium of 27.2 USD (after commissions) or a 1.7% potential income return in 30 days.

These trades come as the #38 and #39 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 3.62% from our $750 monthly goal, while in total we have already reached 74.66% from our monthly goal so far.

What happens next?

On expiry date (September 18, 2020) SPCE is trading above $16 per share -  options expire worthlessly and we keep premium - if SPCE trades under $16 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 $16-$0.24 = $15.73

In other words, SPCE can fall from the current price of $17.83 way down to $15.73 and we will still be break-even

As we are selling credit spread here, in case SPCE suddenly drops bellow our second bought put at the strike price $15 it will help to mitigate risk, in other words - selling credit spreads has some advantages

Selling put credit spreads on SPCE stock
Selling put credit spreads on SPCE stock
  • Running Total  20 Trades since April 27, 2020
  • Options Income: $338