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)
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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