Sold 5 Credit Spreads on CLOV – 6.69% potential income return in 42 days

On August 13, 2021, I sold 5 bull put credit spreads on CLOV stock with an expiry set in the next 42 days (September 24, 2021). For this trade, I got a premium of $251 (after commissions)

Clover Health Investments Corp. provides healthcare insurance services. It uses its proprietary technology platform to collect, structure, and analyze health and behavioral data to improve medical outcomes and lower costs for patients. The company was founded in 2014 and is headquartered in Franklin, TN.

These trades come as the #7 and #8 in the month of August, and according to my trading plan for this month, the premium generated from this trade makes me about 17.92% of my $1,400 monthly goal.  While in total I have reached already 80.37% so far. Awesome.

Here is the trade setup:

  • BOT 5 CLOV SEP 24 '21 - 7.5 + 5.5 Put Bull Spread -0.566 USD

For this trade, I got a premium of 251 USD (after commissions) or a 6.69% potential income return in 42 days, if options expire worthlessly

YTD this stock is down by more than 45%. When placing this trade I wanted to construct a strike price close to the YTD minimum

What happens next?

On the expiry date, September 24, 2021, CLOV is trading above $7.5 per share -  options expire worthlessly and I keep premium - if CLOV trades under $7.5 on the expiry date, I will get assigned 500 shares and will have to buy them for $3,750

But as I already have collected a premium of $0.50 per share, my break-even price for this trade then is $7.5-$0.5 = $7

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 additional 6 shares with ARCC stock. This purchase will contribute to my dividend portfolio on average an additional $0.68 every month. Not the biggest addition, but every bit counts.

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.