Roll Forward and Down 1 Credit Spread on ET – 1.94% potential income return in 210 days

On April 5, 2021, we bought back 1 bull put credit spreads on ET stock, and additionally sold 1 new bull put credit spreads with lower strikes prices and expiry further out (roll forward and down). The aftermath of this trade $13.6 (after commissions)

Originally we opened this trade on March 19: Sold 1 Credit Spread on Energy Transfer (NYSE:ET) – 2.77% potential income return in 21 days

These trades come as the #11 and #12 in the month of March, according to our trading plan for this month, the premium generated from this trade makes us about 1.07% from our $2,800 monthly goal.  While in total we have reached already 7.25% this month so far. Awesome.

Here is our trade setup:

  • SLD    1    ET    APR 09 '21 - 8 + 7 Put Bull Spread    -0.34    USD
  • BOT    1    ET    OCT 15 '21 - 7 + 6 Put Bull Spread    -0.35    USD    

The aftermath for this trade, we got a total premium of 13.6 USD (after commissions) or 1.94% potential income return in 210 days (if options expire worthlessly).In other words, we bought some time and lowered our strike price from $8 to $7

What happens next?

On the expiry date (October 15, 2021) ET is trading above $7 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If ET trades under $7 on the expiry date, we get assigned.

But as we already have collected a premium of $0.13 per share, our break-even price for this trade then is $7-$0.13= $6.87

As we are selling credit spreads, our max risk is defined, in case the stock will drop below $6, our second bought put will work as insurance and will minimize our potential losses.