Naked Put on GPS - Potential income return 5.4% in 14 days

On May 22, 2020, we sold 1 naked put on GPS stock with strike price $7.5 and get for that $0.43 premium (before commissions)

This trade comes just shortly after 100 shares of GPS were called away at the strike price of $8, see: Closed GPS Covered Call with +$108 Profit (14.22% yield in 22 days)

Here is our trade setup:

  • SLD 1 GPS JUN 05 '20 7.5 Put Option  0.43 USD

what can happen next:

GPS is trading above our strike price of $7.5 at expiry date (June 5, 2020), in such scenario, we keep the premium and most probably sell more naked puts to generate additional income. Our max gain is already realized in such a scenario: $43, or 5.4% potential income in 14 days if the option contract expires worthless.

In case GPS is trading below our strike price of $7.5, we will get assigned 100 shares of GPS at price $7.5 per share

Our break-even price: $7.07

We are looking to generate income from selling puts against this stock, and if assigned we will sell covered calls. It's called a wheel strategy

Selling naked put on GPS stock
Selling naked put on GPS stock

  • Running Total  9 Trades since May 1, 2020
  • Trade P/L $140, with capital at risk $1,650
  • 8.48% income from premiums in 22 days