Discover more from Covered Calls with Reinis Fischer
Sold 1 Credit Spread on ARCC – 1.26% potential income return in 38 days
On September 07, 2021, I sold 1 bull put credit spread on ARCC stock with an expiry set in the next 38 days. For this trade, I got a premium of $25.20 (after commissions)
Ares Capital Corporation (NASDAQ: ARCC) is a market-leading Business Development Company and one of the largest direct lenders in the U.S.
These trades come as the #9 and #10 in the month of September, according to my trading plan for this month, the premium generated from this trade makes me about 2.52% of my $1,000 monthly goal. While in total I have reached already 21.2% so far. Awesome.YTFY
YTD ARCC is up by 22% and now trades close to its 52 week high.
There are several reasons I like this stock, but one and the most important - it is part of my dividend stock portfolio and I really wouldn't mind getting assigned more shares.
Here is the trade setup:
BOT 1 ARCC OCT 15 '21 19 Put Option 0.17 USD
SLD 1 ARCC OCT 15 '21 20 Put Option 0.47 USD
For this credit spread, I got a credit of 25.2 USD (after commissions) or a 1.26% potential income return in 38days, if options expire worthlessly
What happens next?
On the expiry date, October 15, 2021, ARCC is trading above $20 per share - options expire worthlessly and I keep premium - if ARCC trades under $20 on the expiry date, I will get assigned 100 shares and will have to buy them for $2,000
But as I already have collected a premium of $0.25 per share, my break-even price for this trade then will be $20-$0.25 = $19.75
In case of assignment, I will turn this trade into a wheel strategy and will start selling covered calls, while collecting hefty more than 8% quarterly dividend.