Naked Put on AMC - Potential income return 8.8% in 28 days

On August 14, 2020, we sold 1 naked put on AMC stock with a strike price at $4.5 and expiry in September 11. For this trade, we get a $0.42 in premium (before commissions)

We call these trades naked because we are trading on margin, in case of an assignment we will borrow from broker funds to finance the purchase. 

This trade comes as the #30 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 5.28% from our $750 monthly goal, while in total we have already reached 60.74% 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 SEP 11 '20 4.5 PUT Option 0.42 USD

What can happen next?

AMC is trading above our strike price of $4.5 at the expiry date (September 11, 2020), in such a scenario, we keep the premium. Our max gain is already realized: $39.6, or 8.8% potential income in 28 days if the option contract expires worthless. 

In case AMC is trading below our strike price of $4.5 we will get assigned 100 shares of AMC at the strike price $4.5 per share, in such case we will sell covered calls to lower our cost basis.

Our break-even price: $4.11

Selling naked puts with AMC stock
Selling naked puts with AMC stock
  • Running Total  7 Trades since August 3, 2020
  • Options Income: $120