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Sold 2 Credit Spreads on FCEL – 3.36% potential income return in 8 days
Hello traders, hope you had a nice Christmas eve. I did. Cutting a tree in the forest with a toddler girl was fun.
The last couple of weeks I’ve been busy with … life, and I had less time to post my trades, but it doesn’t mean I was absent from the market. I did a few trades last week, some roll-ups. Due to increased market volatility and a negative cash balance (portfolio margin) I have stopped buying new stocks
Anyhow, back to the topic:
On December 23, 2021, I sold 2 credit spread bull put options on FCEL stock with an expiry set in the next 8 days on December 31, 2021. For this trade, I got a premium of $404 (after commissions)
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.
FuelCell Energy, Inc. is an American fuel cell power company. It designs, manufactures, operates, and services Direct Fuel Cell power plants that run on natural gas and biogas.
I believe FCEL stock is trading close to the bottom (but you never know) and entering a trade with a stock price of $6.37 is much more pleasant than entering it at $11 and watching the stock dip.
Here is the trade setup:
SLD 1 FCEL DEC 31 '21 6 Put Option 0.33 USD
BOT 1 FCEL DEC 31 '21 5 Put Option 0.08 USD
For this trade, I got a premium of 40.5 USD (after commissions) or a 3.36% potential income return in 8 days, if options expire worthlessly
What happens next?
On the expiry date, December 31, 2021, FCEL is trading above $6 per share - options expire worthlessly and I keep premium - if FCEL trades under $6 on the expiry date, I risk getting assigned 200 shares and buying them for $1,200
But as I already have collected a premium of $0.2 per share, my break-even price for this trade then is $6-$0.2 = $5.8
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.