Discover more from Covered Calls with Reinis Fischer
Sold 1 Put Option on Amazon stock – 0.3% potential income return in 14 days
On April 14th, 2023, I sold 1 put option on Amazon stock with a strike price of $85 and expiry on April 28, 2023). For this trade setup, I was rewarded with $26.15 (after commissions), which would yield about 0.30% return in 14 days if the put option will expire worthless.
When choosing the strike price for this trade I was looking for a very high-profit probability trade and chose a strike with Delta 0.05, giving about a 95% profit probability this trade will expire worthless.
Now, there is always a 5% risk that things could go South. And in fact, there is an earnings call planned on APR 27, but I believe the outcome is already priced in. I might be absolutely wrong!
I'm ready to take the assignment risk and turn this trade into a covered call
Also, this trade comes as the #5 in the month of April, according to my trading plan for this month, the premium generated from this trade makes up about 13% of my $200 monthly goal. While in total I have reached already 68.48% this month so far. Awesome.
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 AMZN APR 28 '23 85 Put Option 0.27 USD
For this trade, I got a premium of 26.15 USD (after commissions) or about 0.3% potential income return in 14 days, if options expire worthlessly
What happens next?
On the expiry date, April 28, 2023, AMZN is trading above $85 per share - options expire worthlessly and I keep premium - if AMZN trades under $85 on the expiry date, I risk getting assigned 100 shares, and will have to buy them paying $8,500
But as I already have collected a premium of $0.26 per share, my break-even price for this trade is $85-$0.26 = $84.74
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment.
In total: 16 trades since February 6, 2023
Options premium: $193