Naked Put on AMC - Potential income return 11.9% in 11 days

On August 3, 2020, we sold 1 naked put on AMC stock with a strike price at $4 and get for that $0.5 premium (before commissions)

This trade comes as the #4 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 6.34% from our $750 monthly goal, while in total we have already reached 9.73% from our monthly goal so far.

AMC stands for - AMC Entertainment Holdings, Inc. (d/b/a AMC Theaters, originally an abbreviation for American Multi-Cinema; often referred to simply as AMC and known in some countries as AMC Cinemas or AMC Multi-Cinemas) is an American movie theater chain, majority-owned by Chinese Wanda Group and listed as a subsidiary headquartered in Leawood, Kansas, and the largest movie theater chain in the world. Founded in 1920, AMC has the largest share of the U.S. theater market ahead of Cineworld and Cinemark Theatres.

here is our trade setup:

  • SLD 1 AMC AUG 14 '20 4 PUT Option 0.5 USD

What can happen next?

AMC is trading above our strike price of $4 at the expiry date (August 14, 2020), in such a scenario, we keep the premium. Our max gain is already realized: $47.6, or 11.9% potential income in 11 days if the option contract expires worthless. 

In case AMC is trading below our strike price of $4 we will get assigned 100 shares of RIOT at the strike price $4 per share, in such case we will sell covered calls to lower our cost basis.

Our break-even price: $3.52

Selling covered calls with AMC stock
Selling covered calls with AMC stock
  • Running Total  3 Trades since August 3, 2020
  • Options Income: $58