Discover more from Covered Calls with Reinis Fischer
Sold 1 Bull Put Credit Spread on Bank of America Stock – 10.67% potential income return in 14 days (278.16% annualized)
On June 16, 2023, I sold 1 bull put spread on Bank of America stock (NYSE:BAC) with strike prices at $29 and $26 with expiry on June 30, 2023. For this trade setup, I was rewarded with $32.02 (after commissions).
The Bank of America Corporation is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina, with investment banking and auxiliary headquarters in Manhattan. The bank was founded in San Francisco, California.
From the premium received, I bought 1 share of BAC stock itself. 99 to go, before I will be able to establish covered call options for this position. Additionally, BAC is a dividend-paying stock, with a yield above 2%. One share will boost my dividend stock portfolio by $0.74. Not the biggest addition, but every cent counts.
When setting up this trade I was looking for more aggressive, near the money, strike prices, as I’m actually ready for the stock assignment at $29
.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 BAC JUNE 30 '23 29 Put Option 0.39 USD
BOT 1 BAC JUNE 30 '23 26 Put Option 0.05 USD
What happens next?
On the expiry date, June 30, 2023, BAC is trading above $29 per share - options expire worthlessly and I keep premium - if BAC trades under $29 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $2,900
In case the stock falls under $26, I have protection.
As I already have collected a premium of $0.32 per share, my break-even price for this trade is $29-$0.32 = $28.68
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: 7 trades since March 14, 2023
Options premium: $163