Welcome options traders, last trading week for 2021 has started and I decided to roll out a few positions into 2022.
On December 27, 2021, I decided to turn a losing credit spread on RIDE stock into a losing put option but minimizing my risk by lowering strike prices.
Originally this trade was opened as a credit spread back in November, see: Sold 4 Credit Spreads on RIDE – 4.24% potential income return in 46 days
I rolled forward and down 4 short put options, sold 4 long put options.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
Here is the trade setup:
BOT 4 RIDE DEC 31 '21 5 Put Option 1.02 USD
SLD 4 RIDE FEB 04 '22 4 Put Option 0.51 USD
SLD 4 RIDE DEC 31 '21 4 Put Option 0.13 USD
Aftermath of this trade -96 USD (after commissions) or a -6% potential income loss in 81 days, if options expire worthlessly
What happens next?
On the expiry date, February 04, 2022, RIDE is trading above $4 per share - options expire worthlessly and I keep premium - if RIDE trades under $4 on the expiry date, I risk getting assigned 400 shares and buying them for $1,600
My break-even price is $4.21
In case of an assignment, I will turn this trade into a wheel, but prior to the assignment I will try to roll out this trade