Credit Spread on Virgin Galactic (NYSE:SPCE) – 1.48% potential income return in 35 days / 15.42% annualized

On October 23, 2020, we sold a bull put credit spread on SPCE stock with an expiry set in the next 35 days (November 27). For this trade, we got a $30 premium (before commissions)

Virgin Galactic is a British spaceflight company within the Virgin Group. It is developing commercial spacecraft and aims to provide suborbital spaceflights to space tourists and suborbital launches for space science missions.

here is our trade setup:

  • SLD 1 SPCE NOV 27 '20 17 Put Option 1.11 USD

  • BOT 1 SPCE NOV 27 '20 16 Put Option 0.81 USD

These trades come as the #34 and #35 in the month of October, according to our trading plan for this month, the premium generated from this trade makes us about 4.2% from our $600 monthly goal, while in total we have already reached 83.52% so far.

What happens next?

On the expiry date (November 27, 2020) SPCE is trading above $17 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If SPCE trades under $17 on the expiry date, we get assigned.

But as we already have collected a premium of $0.25 per share, our break-even price for this trade then is $17-$0.25= $16.75

As we are selling credit spread, we are trading with protection, in case the stock will drop under $17, our second bought put will work as insurance and will minimize our potential loses.

Selling credit spreads on SPCE stock
Selling credit spreads on SPCE stock
  • Running Total 24 Trades since April 27, 2020

  • Options Income: $379