Sold 3 Credit Spreads on ZNGA – 3.52% potential income return in 21 days

On January 22, 2021, we sold 3 bull put credit spreads on ZNGA stock with an expiry set in the next 21 days. For this trade, we got a $120 premium (before commissions)

These trades come as the #35 and #36 in the month of January, according to our trading plan for this month, the premium generated from this trade makes us about 4.22% from our $2,500 monthly goal.  While in total we have reached already 95.92% so far. Awesome.

Zynga Inc. is an American social game developer running social video game services and founded in April 2007 with headquarters in San Francisco, California, United States. The company primarily focuses on mobile and social networking platforms. Zynga states its mission as "connecting the world through games."

I've been watching Zynga Inc (NASDAQ:ZNGA) for some time (this stock frequently appears on the most traded stocks list on Barchart.com)

I have no opinion on the company, just technicals, so today I sold a few bull put credit spreads to dip my toe in the water. Looking at a possibility to add some other great ticker to our wheel trades.

Here is what analysts are saying: The 20 analysts offering 12-month price forecasts for Zynga Inc have a median target of 12.00, with a high estimate of 14.75 and a low estimate of 8.00. The median estimate represents a +13.85% increase from the last price of 10.54.

ZNGA stock forecast according to CNN money
ZNGA stock forecast according to CNN money

Here is our trade setup:

  • BOT 3 ZNGA FEB 12 '21 - 10 + 8.5 Put Bull Spread  -0.40 USD

For this trade, we got a premium of $105.60 (after commissions) or a 3.52% potential income return in the next 21 days.

What happens next?

On the expiry date (February 12, 2021) ZNGA is trading above $19 per share -  options expire worthlessly and we keep premium - if ZNGA trades under $10 on the expiry date, we get assigned.

But as we already have collected a premium of $0.35 per share, our break-even price for this trade then is $10-$0.35= $9.65

Selling credit spreads with ZNGA stock
Selling credit spreads with ZNGA stock
  • Running Total 2 trades since January 22, 2021

  • Options Income: $106