Credit Spread on TLRY – 4.74% potential return in 23 days

On August 5, 2020, we sold a bull put credit spread on TLRY stock with expiry in the next 23 days.

Here is our trade setup:

  • BOT 1 TLRY AUG 28 '20 - 7 + 6 Put Bull Spread  -0.38  USD  

For this trade, we got a premium of 33.20 USD (after commissions) or 4.74% potential income return in 23 days. 

These trades comes as the #6 and #7 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 4.42% from our $750 monthly goal, while in total we have already reached 16.77% 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 (August 28, 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 0.33 per share, our break-even price for this trade then is $7-$0.33 = $6.67

In other words, TLRY can fall from the current price of $8.05 down to $6.67 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  6 Trades since July 23, 2020
  • Options income: $66