SDC – Credit Spread – 7.5% potential return in 23 days

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) 

Naked puts with SDC

Running Total  4 Trades since April 27, 2020
Trade P/L $101, with capital at risk $1,200 (our potential return is 8.4%)