Naked Put on INGA - Potential income return 0.7% in 7 days

On July 3, 2020, we sold 1 naked put on INGA (dutch stock)  with a strike price at EUR 6 and get for that a tiny EUR 0.05 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 #7 in the month of July, and if we stick with our trading plan for this month, premium generated from this trade makes us about 0.6% from our $700 monthly goal, while in total we have already reached 23.06% from our monthly goal in the first two days of July. Amazing.

As we are already holding one covered call with INGA stock, we actually don't mind to add 100 more shares at the discounted price. We call it a wheel strategy.

Here is the trade setup:

  • SLD 1 INGA JUL 10 '20 6 Put Option 0.05 EUR

what can happen next:

INGA is trading above our strike price of EUR 6 at the expiry date (July 10, 2020), in such case, we keep the premium and probably sell more naked puts to generate additional income or we jump to other stock. Our max gain is realized in this situation. EUR 4.21 or 0.7% potential income in 7 days if the option contract expires worthless. Not the biggest addition, but every bit counts. Taking EUR 5/week - can result in EUR 20/mo, which in turn can result in EUR 240/year. 

In case INGA is trading below our strike price of EUR 6, we gt assigned 100 shares of INGA at price EUR 6 per share. With INGA trading at EUR 6.4, the probability that our option will expire worthlessly is more than 80%

Probabilities selling INGA stock
83% Profit Probability selling INGA stock

When entering this trade, we are very confident that this is going to expire worthlessly, but as usual, we are ready to take the stock and sell covered calls

Our break-even: EUR 5.95

Selling puts and calls with Inga stock
Selling puts and calls with Inga stock

  • Running Total  10 Trades since May 11, 2020
  • Trade P/L EUR 65