Sold 3 Put Options on BAC – 1.81% potential income return in 108 days

On May 26, 2023, I sold additional 3 put options on Bank of America stock with a strike price of $24 and expiry on June 30, 2023). For this trade setup, I was rewarded with $36.9 (after commissions), which would yield about a 1.81% return in 108 days if the options will expire worthless.

The Bank of America Corporation is an American multinational investment bank and financial services holding company. It is the second-largest banking institution in the United States, after JPMorgan Chase, and the second-largest bank in the world by market capitalization. Bank of America is one of the Big Four banking institutions of the United States.

When setting up this trade I was looking for a high probability winning trade and chose my strike price for the short put with Delta less than -0.1.

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 BAC June 30 '23 24 Put Option 0.13 USD

For this trade, I got a premium of 36 USD (after commissions) or about 1.81% potential income return in 108 days, if options expire worthlessly

What happens next?

On the expiry date, June 30, 2023, BAC is trading above $24 per share -  options expire worthless and I keep premium - if BAC trades under $24 on the expiry date, I risk getting assigned 300 shares, and will have to buy them paying $7,200

But as I already have collected a premium of 0.43 per share, my break-even price for this trade is $24-$0.43 = $23.57

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: 4 trades since March 14, 2023

• Options premium: $131