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Sold 1 Bull Put Credit Spread on TSLA – 3.4% potential income return in 10 days
On April 18th, 2023, I sold 1 bull put spread on Tesla stock with strike prices at $150 and $145 with expiry on April 28th, 2023. For this trade setup, I was rewarded with $16.96 (after commissions).
When setting up this trade I was looking for a high probability profit trade and chose my strike prices with Delta less than 0.05.
Now, there is always a 5% risk that things could go South. And in fact, there is an earnings call scheduled on APR 19, but I believe the outcome is already priced in. I might be absolutely wrong!
In case the stock price for Tesla will drop under my strike price at $150, I will try to close this position or adjust with a small loss, in worst case scenario I’m ready to take an assignment and convert this trade into a covered call.
Also, these trades comes as the #6 and #7 in the month of April. According to my trading plan for this month, the premium generated from this trade makes about 8.48% of my $200 monthly goal. While in total I have reached already 76.96% this month so far.
It seems I wont crack my goal this month, as I’m not planning any additional trades this month. But that’s okay!
The inspiration for this trade comes from the following trade idea: Sell Options With TSLA stock to Buy a Tesla car.
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:
SLD 1 TSLA APR 28 '23 150 Put Option 0.56 USD
BOT 1 TSLA APR 28 '23 145 Put Option 0.36 USD
What happens next?
On the expiry date, April 28, 2023, TSLA is trading above $150 per share - options expire worthlessly and I keep premium - if TSLA trades under $150 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $15,000
But as I already have collected a premium of $0.17 per share, my break-even price for this trade is $150-$0.17 = $149.83
As I’m selling bull put credit spread, my max risk is the width of the spread or $500.
Risking $500 to make $17, with 95% probability of profit in 10 days, would give about 3.4% potential income return
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment.
In total: 2 trades since April 18, 2023
Options premium: $17