Sold 5 Credit Spreads on ACB – 6.17% potential income return in 42 days

On July 30, 2021, I sold 5 bull put credit spreads on ACB stock with an expiry set in the next 42 days. For this trade, I got a premium of $216 (after commissions)

Aurora Cannabis Inc. is a Canadian licensed cannabis producer, headquartered in Edmonton. It trades on the Toronto Stock Exchange and Nasdaq as ACB. As of late September 2018, Aurora Cannabis had eight licensed production facilities, five sales licenses, and operations in 25 countries.

These trades come as the #9 and #10 in the month of July, according to my trading plan for this month, the premium generated from this trade makes me about 10.8% of my $2,000 monthly goal.  While in total I have reached already 53.75% so far. Awesome.

Here is the trade setup:

  • BOT 5 ACB SEP 10 '21 - 7 + 5.5 Put Bull Spread -0.48 USD

For this trade, I got a premium of 216 USD (after commissions) or a 6.17% potential income return in 42 days, if options expire worthlessly

I entered this trade quite aggressively, constructing strike prices near the money, will see was it a smart move?!

What happens next?

On the expiry date, September 10, 2021, ACB is trading above $7 per share -  options expire worthlessly and I keep premium - if ACB trades under $7 on the expiry date, I will get assigned 500 shares and will have to buy them for $3,500

But as I already have collected a premium of $0.43 per share, my break-even price for this trade then is $7-$0.43 = $6.57

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

From the premium received I bought 5 shares with WBA stock. This purchase will contribute to my dividend portfolio on average $0.68 a month. Awesome

This is what I plan to do by the end of this year - reinvesting most of the premiums received into dividend-paying stocks, for this year my goal is to reach at least $65 in projected monthly income.

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