Sold 3 Credit Spreads on FCEL – 4.8% potential income return in 28 days

On November 20, 2020, we sold 3 bull put credit spreads on FCEL stock with an expiry set in the next 28 days. For this trade, we got a $75 premium (before commissions)

FCEL - FuelCell Energy, Inc. is a fuel cell power company. It designs, manufactures, operates and services Direct Fuel Cell power plants that run on natural gas and biogas. As the biggest publicly traded fuel cell manufacturer in the U.S., the company operates over 50 plants all over the world

These trades come as the #25 and #26 in the month of November, according to our trading plan for this month, the premium generated from this trade makes us about 12.8% from our $450 monthly goal, while in total we have already reached 152.73% so far. Awesome

Here is our trade setup:

  • BOT 3 FCEL DEC 18 '20 - 4+ 3 Put Bull Spread  -0.25  USD  

For this trade, we got a premium of 57.60 USD (after commissions) or 4.8% potential income return in 28 days (if options expire worthlessly)

It was agreed to sell credit spreads on FCEL stock after 100 shares with PBCT got called away and freed us an additional $1,200. We decided to deploy this money as a guarantee for trades with FCEL to generate some extra income.

What happens next?

On the expiry date (December 18, 2020) FCEL is trading above $4 per share -  options expire worthlessly and we keep premium, realizing our max potential from this trade. If FCEL trades under $4 on the expiry date, we get assigned.

But as we already have collected a premium of $0.19 per share, our break-even price for this trade then is $4-$0.19= $3.81

As we are selling credit spreads, our max risk is defined, in case the stock will drop below $3, our second bought put will work as insurance and will minimize our potential losses.

Selling credit spreads with FCEL stock
Selling credit spreads with FCEL stock
  • Running Total  4 Trades since September 2, 2020

  • Options income: $68