Roll Forward and Down 4+1 Credit Spreads on SOLO – 4.17% potential income return in 64 days

On February 26, 2021, we bought back 4 bull put credit spreads on SOLO stock, and additionally sold 5 new bull put credit spreads with lower strikes prices and expiry further out (roll forward and down + increase in size). The aftermath of this trade $125.2 (after commissions)

We usually roll forward only covered calls, but with market prices tanked and not willing to take assignment now as it would increase drastically our margin, it was agreed to roll forward a credit spread for a credit.

Originally we opened this trade on February 11: Sold 4 Credit Spreads on SOLO – 4.17% potential income return in 15 days

ElectraMeccanica Vehicles Corporation is a Canadian designer and manufacturer of environmentally efficient electric vehicles headquartered in Vancouver, British Columbia. Established in 2015, the company’s flagship vehicle is the purpose-built, single-seat three wheeled Electric Vehicle called the SOLO

These trades come as the #53 and #54 in the month of February

Here is our trade setup:

  • BOT 4  SOLO  FEB 26 '21 7 Put Option 1.17 USD
  • BOT 5  SOLO  APR 16 '21 - 6 + 4 Put Bull Spread   -1.02  USD 

The aftermath for this trade, we got a total premium of 125.2 USD (after commissions) or 4.17% potential income return in 64 days (if options expire worthlessly).In other words, we bought some time and lowered our strike price from $7 to $6

What happens next?

On the expiry date (April 16, 2021) SOLO is trading above $6 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If SOLO trades under $6 on the expiry date, we get assigned.

But as we already have collected a premium of $0.25 per share, our break-even price for this trade then is $6-$0.25= $5.75

As we are selling credit spreads, our max risk is defined, in case the stock will drop below $4, our second bought put will work as insurance and will minimize our potential losses.

In case of assignment, we are ready to spend $3,000 to buy 500 shares with SOLO stock

Selling Credit spreads with SOLO stock
Selling Credit spreads with SOLO stock
  • Running Total  26 Trades since November 23, 2020

  • Options income: $3,142