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Sold 1 Put Bull Ratio Back Spread on SPCE - potential income return 1.38% in 50 days
On December 02, 2021, I sold 1 bull put ratio back spread option on SPCE stock with an expiry set in the next 50 days on January 21, 2022. For this trade, I got a premium of $20.8 (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 SPCE JAN 21 '22 15 Put Option 1.72 USD
BOT 2 SPCE JAN 21 '22 12.5 Put Option 0.71 USD
For this trade, I received a premium of 20.8 USD (after commissions) or a 1.38% potential income return in 50 days, if options expire worthlessly
What happens next?
On the expiry date, January 21, 2022, SPCE is trading above $15 per share - options expire worthlessly and I keep premium - if SPCE trades under $15 on the expiry date, I risk getting assigned 100 shares and buying them for $1,500
In case SPCE will drop below our second bought strike prices at $12.5, 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
Break-Even prices: $15.2 and $10.2