Sold 1 Credit Spread on NYSE:RBLX – 1.37% potential income return in 59 days
On February 20, 2024, I sold 1 bull put credit spread on NYSE: RBLX stock with an expiry set in the next 59 days (April 19). For this trade, I got a premium of $48 (after commissions).
From the premium received, I bought 1 RBLX share for our stock portfolio. 99 to go, before we will start selling covered calls on it.
Roblox Corporation is an American video game developer based in San Mateo, California. Founded in 2004 by David Baszucki and Erik Cassel, the company is the developer of Roblox, which was released in 2006. As of December 31, 2022, the company employs over 2,100 people.
I came up with this trade idea after my 5 year old daughter asked can she play Roblox on her tablet. After researching is Roblox safe for 5 year olds, and it seems it is, at least as long as you are doing it together.
Before hitting that download button, I proposed a little deal: - Let's get Roblox on your tablet, but how about we also dabble in some Roblox stock trading? Thats how we come up with idea buying some Roblox share once in a while learning investing from the early ages. Now we have some additional topic to talk in the mornings before school bus, or during bedtime story telling.
Now, back to the credit spread - I chose credit spread to limit our risk in case stock goes significantly under our strike price and to save on margin. I remember I was trading options with Roblox a couple of years ago, but the the stock was trading closer to 80ties. With all these tech stocks I'm always concerned the stock could go to 0.
Also I did some Technical Analysis and choose strike prices under current 50/200 day moving averages, thus potentially giving as better chances that option trades are going to expire worthless and we are going to keep the premium.
Last but not least I checked is there planned an earnings report during the time frame we are holding options, and it seems there is no.
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.
Our short strike price of $35 is well under current 50/200 Moving Averages
here is the trade setup:
SLD 1 RBLX Apr19'24 35 PUT 0.56
BOT 1 RBLX Apr19'24 27.5 PUT 0.08
For this credit spread, we got a credit of 48 USD (after commissions) or about 1.37% potential income return in 59 days, if options expire worthlessly
What happens next?
On the expiry date, April 19, 2024, NYSE: RBLX is trading above $35 per share - options expire worthlessly and we keep premium - if RBLX trades under $35 on the expiry date, we risk getting assigned 100 shares and will have to buy them for $3,500.
But as we have already collected a premium of $0.48 per share, our break-even price for this trade is 35-0.48= $34.52
In case of an assignment, we will turn this trade into a wheel strategy and will start selling covered calls.
In total: 3 trades since February 20, 2024
Options premium: $47