Credit Spread on TLRY – 2.17% potential return in 8 days

On July 23, 2020, we sold a bull put credit spread on TLRY stock with expiry in the next 8 days.

Here is our trade setup:

  • BOT 1 TLRY JUL 31 '20 - 7 + 6 Put Bull Spread  -0.23  USD  

For this trade, we got a premium of 15.2 USD (after commissions) or 2.17% potential income return in 8 days. 

Tilray is a Canadian pharmaceutical and cannabis company, incorporated in the United States with primary operations headquartered in Toronto, Ontario. Tilray also has operations in Australia & New Zealand, Germany, Portugal, and Latin America

Tilray made history by being the first cannabis company to debut on a major U.S. stock exchange in July 2018. TLRY debuted on the NASDAQ at a price of $17 per share, and rose dramatically in September 2018 to $214 per share and then crashed to $29 per share by August 2019

These trades come as the #29 and #30  in the month of July, and if we stick with our trading plan for this month, premium generated from this trade setup makes us about 2.17% from our $700 monthly goal, while in total we have already reached 90.23% from our monthly goal.

We like selling credit spreads, as we can save on cash locked for margin. Selling 1 dollar wide credit spread we had to put on lock about $89. If we were selling just a put our margin impact would be about $250. Selling credit spreads can help save on margin impact. 

What happens next?

On expiry date (July 31, 2020) TLRY is trading above $7 per share -  options expire worthlessly and we keep premium - if TLRY trades under $6 on the expiry date, we get assigned.

But as we already have collected a premium of 0.15 per share, our break-even price for this trade then is $7-$0.15 = $6.85

In other words, TLRY can fall from the current price of $7.34 down to $6.85 and we will still be break-even

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

Selling Credit Spreads with TLRY stock
Selling Credit Spreads with TLRY stock
  • Running Total  2 Trades since July 23, 2020
  • Options income: $15