Discover more from Covered Calls with Reinis Fischer
Sold 3 Credit Spreads on GPS Stock – 2.08% potential income return in 42 days (18.07% annualized)
On August 25, 2023, I sold 3 bull put credit spreads on GPS stock (NYSE:GPS) with a strike prices of $9 and $7 and expiry on October 6, 2023. For this trade setup, I was rewarded with $56.27 (after commissions).
The Gap, Inc., commonly known as Gap Inc. or Gap, is an American worldwide clothing and accessories retailer. Gap was founded in 1969 by Donald Fisher and Doris F. Fisher and is headquartered in San Francisco, California. The company operates four primary divisions: Gap, Banana Republic, Old Navy, and Athleta
From the premium received, I bought an additional 7 shares of GPS stock itself for our long-term stock portfolio. GPS also is a dividend payer, this little addition will boost the portfolio by $3.57 yearly. Amazing!
We are now holding 15 shares with GPS in our stock portfolio, 85 to go before will start selling covered calls to generate extra income.
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 3 GPS Oct06'23 9 PUT 0.25 USD
BOT 3 GPS Oct06'23 7 PUT 0.05 USD
What happens next?
On the expiry date, October 6, 2023, GPS is trading above $9 per share - options expire worthlessly and I keep premium - if GPS trades under $9 on the expiry date, I risk getting assigned 300 shares and will have to buy them paying $2,700
As I already have collected a premium of $0.18 per share, my break-even price for this trade is $9-$0.18= $8.82
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: 8 trades since June 16, 2023
Options premium: $128