Naked Put on SDC - Potential income return 6.82% in 25 days

On August 10, 2020, we sold 1 naked put on SDC stock with a strike price at $8 and expiry on September 4. For this trade, we g0t a $0.57 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 #17 in the month of August, and if we stick with our trading plan for this month, the premium generated from this trade makes us about 7.28% from our $750 monthly goal, while in total we have already reached 38.24% from our monthly goal so far.

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 SEP 04 '20 8 Put Option  0.57 USD

what can happen next:

SDC is trading above our strike price of $8 at the expiry date (Sep 4, 2020), in such scenario, we keep the premium. Our max gain is already realized: $54.60, or 6.82% potential income in 25 days if the option contract expires worthless. 

In case SDC is trading below our strike price of $8, we will get assigned 100 shares of SDC at the strike price $8 per share, in such case we will sell covered calls to lower our cost basis.

Our break-even price: $7.46

Selling naked puts with SDC stock
Selling naked puts with SDC stock
  • Running Total  20 Trades since April 27, 2020
  • Options income $472