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Sold 1 Bull Put Credit Spread on GOOG – 0.19% potential income return in 18 days
On May 8, 2023, I sold 1 bull put spread on Alphabet Inc Class C stock with strike prices at $97 and $92 with expiry on May 26, 2023. For this trade setup, I was rewarded with $18.5 (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. Though when looking at the following chart I feel quite inspired:
The so-called golden cross is forming for the GOOG stock, meaning we might enter into a bullish phase and the GOOG stock could rally in the next months/quarters.
In case the stock price for GOOG will drop under my strike price at $97, I will try to close this position or adjust with a small loss, in the worst-case scenario I’m ready to take an assignment and convert this trade into a covered call.
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 GOOG MAY 26 '23 97 Put Option 0.34 USD
BOT 1 GOOG MAY 26 '23 92 Put Option 0.12 USD
What happens next?
On the expiry date, May 26, 2023, GOOG is trading above $97 per share - options expire worthlessly and I keep premium - if GOOG trades under $97 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $9,700
But as I already have collected a premium of $0.18 per share, my break-even price for this trade is $97-$0.18 = $96.82
As I’m selling a bull put credit spread, my max risk is the width of the spread or $500.
Risking $500 to make $18, with a 95% probability of profit in 18 days, would give about a 3.6% 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 May 8, 2023
Options premium: $19