Sold 4 Credit Spreads on SDC – 4.18% potential income return in 14 days

On September 17, 2021, I sold 4 bull put credit spreads on SDC stock with an expiry set in the next 14 days on October 01. For this trade, I got a premium of $92 (after commissions)

Disclosure:  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.

SmileDirectClub is a teledentistry company. The company was co-founded in 2014 by Jordan Katzman and Alex Fenkell. It is based in Nashville, Tennessee

These trades come as the #26 and #27 in the month of September, according to my trading plan for this month, the premium generated from this trade makes me about 9.2% of my $1,000 monthly goal.  While in total I have reached already 78.82% so far. Awesome.

I've been trading SDC stock with mixed success since April 2020, have seen both ups and downs. Volatile stock means a juicier premium and also more risk. Credit spreads give protection.

Here is the trade setup:

  • SLD 1 SDC OCT 01 '21 5.5 Put Option 0.30 USD

  • BOT 1 SDC OCT 01 '21 4.5 Put Option 0.07 USD

For this credit spread, I got a credit of 92 USD (after commissions) or a 4.18% potential income return in 14 days, if options expire worthlessly

What happens next?

On the expiry date, October 01, 2021, SDC is trading above $5.5 per share -  options expire worthlessly and I keep premium - if SDC trades under $5.5 on the expiry date, I will get assigned 400 shares and will have to buy them for $2,200

But as I already have collected a premium of $0.23 per share, my break-even price for this trade then will be $5.5-$0.23 = $5.23

In case of assignment, I will turn this trade into a wheel strategy and will start selling covered calls