Partial Roll forward and down 3 Credit Spreads on SOLO – 5.91% potential income return in 81 days

On April 7, 2021, bought back 2 out of 3 bull put credit spread options on SOLO stock and additionally sold 3 new bull put credit spreads with expiry further out (roll forward) and lower strike prices (roll down). The aftermath of this trade $71 (after commissions)

Originally we opened this trade on March 03: Sold 6 Credit Spreads on SOLO – 6.04% potential income return in 37 days, but as our strike price got challenged and we decided to not take a full assignment, we decided to do a partial roll, rolling half of our contracts and taking an assignment for the other part. 

These trades come as the #22 and #23 in the month of April, according to our trading plan for this month, the premium generated from this trade makes us about 1.95% from our $2,800 monthly goal.  While in total we have reached already 36.16% this month so far. Awesome.

Here is our trade setup:

  • BOT    2    SOLO    APR 09 '21 5 Put Option     0.280    
  • BOT    3    SOLO    MAY 21 '21 - 4 + 3 Put Bull Spread    -0.23  

The aftermath for this $71 (after commissions) or 5.91% potential income return in 81 days (if options expire worthlessly). In other words, we bought some additional time and lowered our strike price from $5 to $4

What happens next?

On expiry date May 21, 2021 SOLO is trading above $4 per share -  options expire worthlessly and we keep premium - if SOLO trades under $4 on the expiry date, we get assigned.

But as we already have collected a premium of $0.23 per share, our break-even price for this trade then is $4-$0.23 = $3.77