On December 01, 2021, I sold 1 bull put ratio back spread option on INTC with an expiry set in the next 23 days on December 23, 2021. For this trade, I paid a debit of $95.2 (after commissions)
The Put Ratio Back Spread is a 3 leg option strategy as it involves buying two OTM Put options and selling one ITM Put option. This is the classic 2:1 combo.
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 INTC JAN 07 '22 50 Put Option 1.72 USD
BOT 2 INTC JAN 07 '22 49 Put Option 1.30 USD
For this trade, I paid a debit of 95.2 USD (after commissions) or a 1.9% potential income loss in 37days, if options expire worthlessly
What happens next?
On the expiry date, January 07, 2022, INTC is trading above $50 per share - options expire worthlessly and I keep premium - if INTC trades under $50 on the expiry date, I risk getting assigned 100 shares and buying them for $5,000
In case INTC will drop below our second bought strike prices at $49, we will earn additional income
In case of an assignment, I will turn this trade into a wheel, but prior to the assignment I will try to roll out this trade