On May 6, 2020, I sold a bull put credit spread on SDC stock with expiry in the next 23 days.
Here is my trade setup:
- BOT 1 SDC MAY 29 '20 - 7 + 5.5 Put Bull Spread -0.53 USD
For this trade, I got a premium of 53 USD (before commissions) or a 7.5% potential income return in 32 days.
So what happens next?
On expiry day (May 29, 2020) SDC is trading above $7 per share - my options expire and I keep premium - if SDC trades under $7 on expiry date I get assigned.
But as I already have collected a premium of 0.53 per share, my break-even price for this trade then is $7-$0.53 = $6.47
In other words, SDC can fall from the current price of $7.5 way down to $6.47 and I will still be break-even
This trade is a second trade I have opened with SDC stock, I have another trade with the same expiry, but other strikes (5/3.5)
Running Total 4 Trades since April 27, 2020
Trade P/L $101, with capital at risk $1,200 (our potential return is 8.4%)