Sold 1 Credit Spread on GOLD – 1.39% potential income return in 44 days

On September 08, 2021, I sold 1 bull put credit spread on GOLD stock with an expiry set in the next 44 days. For this trade, I got a premium of $27.20 (after commissions)

Barrick Gold Corporation is a mining company that produces gold and copper with 16 operating sites in 13 countries. It is headquartered in Toronto, Ontario, Canada.

These trades come as the #11 and #12 in the month of September, according to my trading plan for this month, the premium generated from this trade makes me about 2.72% of my $1,000 monthly goal.  While in total I have reached already 23.94% so far. Awesome.

YTD Barrick Gold might seem not like the best investment as it is down by almost -20%. But as I have had some good success with this stock in the past I decided to take the risk.

Here is the trade setup:

  • SLD 1 GOLD OCT 22 '21 19.5 Put Option 0.61 USD

  • BOT 1 GOLD OCT 22 '21 18.5 Put Option 0.29 USD

  • For this credit spread, I got a credit of 27.2 USD (after commissions) or a 1.39% potential income return in 44 days, if options expire worthlessly

What happens next?

On the expiry date, October 22, 2021, GOLD is trading above $19.5 per share -  options expire worthlessly and I keep premium - if GOLD trades under $19.5 on the expiry date, I will get assigned 100 shares and will have to buy them for $1,950

But as I already have collected a premium of $0.27 per share, my break-even price for this trade then will be $19.5-$0.27 = $19.23

In case of assignment, I will turn this trade into a wheel strategy and will start selling covered calls