Roll Forward and Down 2 Credit Spreads on XPEV – 1.04% potential income return in 55 days

On April 7, 2021, we bought back 2 bull put credit spreads on XPEV stock, and additionally sold 2 new bull put credit spreads with lower strikes prices and expiry further out (roll forward and down). The aftermath of this trade $69.2 (after commissions)

Originally we opened this trade on March 22: Sold 2 Credit Spreads on XPEV – 1.13% potential income return in 18 days, but as our strike price $35.5 got challenged we decided to roll forward and down, luckily we got some credit.

These trades come as the #24 and #25 in the month of April, according to our trading plan for this month, the premium generated from this trade makes us about 5.08% from our $2,800 monthly goal.  While in total we have reached already 41.25% this month so far. Awesome.

Here is our trade setup:

  • SLD    2    XPEV    Comb:  + (1) XPEV  210409P00034000 - (1) XPEV  210409P00035500    -0.72    ]   
  • BOT    2    XPEV    MAY 14 '21 - 33 + 31 Put Bull Spread    -0.75    ]    

The aftermath for this $69.2 (after commissions) or 1.04% potential income return in 55 days (if options expire worthlessly). In other words, we bought some additonal time and lowered our strike price from $35.5 to $33

What happens next?

On expiry date May 24, 2021 XPEV is trading above $33 per share -  options expire worthlessly and we keep premium - if XPEV trades under $33 on the expiry date, we get assigned.

But as we already have collected a premium of $0.34 per share, our break-even price for this trade then is $33-$0.34 = $32.66