Naked Put on RIOT - Potential income return 6.8% in 16 days

On July 15, 2020, we sold 1 naked put on RIOT stock with a strike price at $2 and get for that $0.16 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 #16 in the month of July, and if we stick with our trading plan for this month, premium generated from this trade makes us about 1.94% from our $700 monthly goal, while in total we have already reached 41.83% from our monthly goal so far in July. Amazing.

RIOT stands for Riot Blockchain company focused on building, supporting and operating Blockchain technologies.

As a person with great interest and good success with Bitcoin / Ethereum investments in the past, I was looking for some ways to be exposed to the cryptos, by not directly owning them. We are still not sure how to invest in some Bitcoin ETF. 

After a quick research RIOT popped on radar, the low share price and decent implied volaitily made us to take action. In case we will get assigned - I don't see much problems selling covered calls on it.

Here is our trade setup:

  • SLD 1 RIOT JUL 31 '20 2 Put Option  0.16 USD

What can happen next?

RIOT is trading above our strike price of $2 at the expiry date (July 31, 2020), in such a scenario, we keep the premium. Our max gain is already realized: $13.6, or 6.8% potential income in 16 days if the option contract expires worthless. 

In case RIOT is trading below our strike price of $2 we will get assigned 100 shares of RIOT at the strike price $2 per share, in such case we will sell covered calls to lower our cost basis.

Our break-even price: $1.87

Selling naked puts with RIOT stock
Selling naked puts with RIOT stock
  • Running Total  1 Trade since July 15, 2020
  • Options income: $14