Naked Put on SDC - Potential income return 6.08% in 21 day

On July 24, 2020, we sold 1 naked put on SDC stock with a strike price at $7.5 and expiry on August 14. For this trade, we get a $0.48 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 #31 in the month of July, and if we stick with our trading plan for this month, premium generated from this trade makes us about 6.51% from our $700 monthly goal, while in total we have already reached 96.74% from our monthly goal.

SDC stands for SmileDirectClub - a teledentistry company listed on Nasdaq.

This is a stock we have been selling puts and covered calls since the end of April 2020 with great success. 

Here is our trade setup:

  • SLD 1 SDC AUG 14 '20 7.5 Put Option  0.48 USD

what can happen next:

SDC is trading above our strike price of $7.5 at the expiry date (Aug 14, 2020), in such a scenario, we keep the premium. Our max gain is already realized: $45.60, or 6.08% potential income in 22 days if the option contract expires worthless. 

In case SDC is trading below our strike price of $7.5, we will get assigned 100 shares of SDC at the strike price $7.5 per share, in such case we will sell covered calls to lower our cost basis.

Our break-even price: $7.05

Selling naked puts with SDC stock
Selling naked puts with SDC stock

  • Running Total  16 Trades since April 27, 2020
  • Options income $350