Roll Forward and Down 1 Credit Spread on LI – 0.64% potential income return in 83 days

On March 02, 2021, we bought back 1 bull put credit spread on LI stock, and additionally sold 1 new bull put credit spread with lower strikes prices and expiry further out (roll forward and down + increase in size). The aftermath of this trade -$17(after commissions)

Originally we opened this trade on February 12: Sold Credit Spread on LI – 3.3 % potential income return in 21 days, while on March 2, we did the first roll forward: Roll Forward and Down 1 Credit Spread on LI – 1.11% potential income return in 48 days  and today we did one more roll forward.

These trades come as the #183 and #184 in the month of March, according to our trading plan for this month, the premium generated from this trade makes us about 11.41% from our $2,000 monthly goal.  While in total we have reached already 235.82% so far. Awesome.

Here is our trade setup:

  • SLD    1    LI    APR 01 '21 - 27 + 23 Put Bull Spread    -2.70    USD  
  • BOT    1    LI    APR 30 '21 - 26.5 + 22.5 Put Bull Spread    -2.33    USD   

The aftermath for this trade, we got a total premium of  negative -17 USD (after commissions) or negative -0.64% potential income return in 83 days (if options expire worthlessly).In other words, we bought some time and lowered our strike price from $27 to $26.5

What happens next?

On the expiry date (April 30, 2021) LI is trading above $26.5 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If LI trades under $26.5 on the expiry date, we get assigned.

As we already have collected a premium of -$0.17 per share, our break-even price for this trade then is $26.5+$0.17= $26.65

As we are selling credit spreads, our max risk is defined, in case the stock will drop below $22.5, our second bought put will work as insurance and will minimize our potential losses.

Selling credit spreads with LI stock
Selling credit spreads with LI stock
  • Running Total  69 Trades since January 19, 2021
  • Options income $1,710