On January 27, 2021, we sold 3 bull put credit spreads on ACB stock with an expiry set in the next 30 days. For this trade, we got a $222 premium (before commissions)
These trades come as the #44 and #45 in the month of January, according to our trading plan for this month, the premium generated from this trade makes us about 8.30% from our $2,500 monthly goal. While in total we have reached already 119.78% so far. Awesome.
Here is our trade setup:
BOT 3 ACB FEB 26 '21 - 9.5 + 7.5 Put Bull Spread -0.74 USD
For this trade, we got a premium of 207.60 USD (after commissions) or a 7.28% potential income return in 30 days (if options expire worthlessly)
What happens next?
On the expiry date (February 26, 2021) ACB is trading above $9.5 per share - options expire worthlessly and we keep premium, realizing our max potential from this trade. If ACB trades under $9.5 on the expiry date, we get assigned.
But as we already have collected a premium of $0.69 per share, our break-even price for this trade then is $9.5-$0.69= $8.82
As we are selling credit spreads, our max risk is defined, in case the stock will drop below $7.5, our second bought put will work as insurance and will minimize our potential losses.
In case of assignment, we are ready to spend $2,850 to buy 300 shares with ACB stock
Running Total 2 Trades since January 27, 2021
Options income: $208