Naked Put on GPS - Potential income return 2.13% in 10 days

On July 21, 2020, we sold 1 naked put on GPS stock with a strike price of $11.5 and expiry in the next 10 days (July 31) and get for that $0.27 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 #26 in the month of July, and if we stick with our trading plan for this month, premium generated from this trade setup makes us about 3.51% from our $700 monthly goal, while in total we have already reached 85.89% from our monthly goal.

Here is our trade setup:

  • SLD 1 GPS JUL 31 '20 11.5 Put Option  0.27 USD

what can happen next:

GPS is trading above our strike price of $11.5 at expiry date (July 31, 2020) we keep the premium. Our max gain is already realized: $24.6, or 2.13% potential income in 10 days if the option contract expires worthless. Not the biggest addition to the income, but every bit counts.

In case GPS is trading below our strike price of $11.5, we will get assigned 100 shares of GPS at the strike price $11.5 per share

Our break-even price: $11.23

Selling covered calls and puts with GPS stock
Selling covered calls and puts with GPS stock
  • Running Total 13 Trades since May 1, 2020
  • Options income: $192