Credit Spread on Virgin Galactic (SPCE) – 0.85% potential income return in 4 days (77.56% annualized)

On September 29, 2020, we sold a bull put credit spread on SPCE stock with an expiry set in the next 4 days (October 2). For this trade, we got a $21 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 OCT 02 '20 19 Put Option 0.43 USD

  • BOT 1 SPCE OCT 02 '20 18 Put Option 0.21 USD

These trades come as the #40 and #41 in the month of September, and according to our trading plan for this month, the premium generated makes us about 2.02% from our $800 monthly goal, while in total we have already reached 87.14% this month

What happens next?

On the expiry date (October 2, 2020) SPCE is trading above $19 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If SPCE trades under $19 on the expiry date, we get assigned.

But as we already have collected a premium of $16.2 per share, our break-even price for this trade then is $19-$0.16= $18.84

As we are selling credit spread, we are trading with protection, in case the stock will drop under $18, our second bought put will work as insurance and will minimize our potential loses.

Selling credit spreads with SPCE stock
Selling credit spreads with SPCE stock

  • Running Total 22 Trades since April 27, 2020

  • Options Income: $354

I’m starting enjoying the idea selling weekly credit spreads on stocks like SPCE