Partial Roll Forward and Down 3 Credit Spreads on RIDE –0.03% potential income loss in 60 days

On August 21, 2021, I did another partial roll forward and roll down on a credit spread I established at the start of August on RIDE stock.

While still holding 3 credit spreads on RIDE stock with expiry this Friday, and while the stock has been failing and touching my strike prices, I decided to spread the risk and not take a full assignment of 3 contracts or 300 shares, but instead take just 1 contract and roll forward and down the rest.

Here is the trade setup:

  • BOT 2 RIDE AUG 27 '21 6 Put Option 0.80 USD

  • SLD 3 RIDE OCT 01 '21 4 Put Option 0.26 USD

Here I bought back 2 contracts with the strike prices of $6, for them I paid in total $160 and sold 3 additional credit spreads with lower strike prices and with an expiry set in October. For this trade, I got $78 (before commissions)

I did 2 things - lowered the strike prices from $6 to $4; increased the contract size, to somehow break even the cost

What happens next?

On the expiry date, October 1, 2021, RIDE is trading above $4 per share -  options expire worthlessly and I keep premium - if RIDE trades under $4 on the expiry date, I will get assigned 300 shares

As this was the break-even trade setup, I actually will lose -$3.6 if options will expire worthlessly. New break-even price $4-$0.01 = $4.01

In case of assignment, will turn this trade into a wheel strategy and will start selling covered calls.