Credit Spread on TLRY – 3.41% potential return in 25 days

On August 17, 2020, we sold a bull put credit spread on TLRY stock with expiry in the next 25 days.

Here is our trade setup:

  • BOT 1 TLRY SEP 11 '20 - 6.5 + 5.5 Put Bull Spread  -0.27  USD  

For this trade, we got a premium of 22.20 USD (after commissions) or 3.41% potential income return in 25 days. 

These trades come as the #34 and #35 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 2.96% from our $750 monthly goal, while in total we have already reached 68.48% from our monthly goal so far.

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 (September 11, 2020) TLRY is trading above $6.5 per share -  options expire worthlessly and we keep premium - if TLRY trades under $6.5 on the expiry date, we get assigned.

But as we already have collected a premium of 0.22 per share, our break-even price for this trade then is $6.5-$0.22 = $6.28

In other words, TLRY can fall from the current price of $7.05 down to $6.28 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  8 Trades since July 23, 2020
  • Options income: $88