Naked Put on SPCE - Potential income return 1.06% in 2 days

On May 27, 2020, we sold 1 naked put on SPCE stock with a strike price at $15 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. 

Here is our trade setup:

  • SLD 1 SPCE MAY 29 '20 7.15 Put Option  0.16 USD

what can happen next:

SPCE is trading above our strike price of $15 at expiry date (May 29, 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: $16, or 1.06% potential income in just 2 days if the option contract expires worthless.

In case SPCE is trading below our strike price of $15, we will get assigned 100 shares of SPCE at the strike price $15 per share

Our break-even price: $14.84

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 SPCE stock

  • Running Total  3 Trades since April 27, 2020
  • Trade P/L $68, with capital at risk $1,500
  • 4.53% income from premiums in 30 days

We are looking to buy 25 shares of SPCE once there will be enough premium to cover at least 12.5 shares. With currect price at $16.98 it would mean - $212.25 collected with premiums. As we have already collected $68 - $144.25 to go