Sold 6 Credit Spreads on RIDE – 7.53% potential income return in 25 days

On August 02, 2021, I sold 6 bull put credit spreads on RIDE stock with an expiry set in the next 25 days. For this trade, I got a premium of $271.20 (after commissions)

RIDE - Lordstown Motors Corporation is an American electric vehicle automaker located in Lordstown, Ohio. The company is based out of the Lordstown Assembly plant which previously belonged to General Motors. General Motors has invested US$75 million in Lordstown Motors

These trades come as the #1 and #2 in the month of August, according to my trading plan for this month, the premium generated from this trade makes me about 19.37% of my $1,400 monthly goal.  While in total I have reached already 19.37% so far. Awesome.

Here is the trade setup:

  • BOT 6 RIDE AUG 27 '21 - 6 + 4 Put Bull Spread -0.50 USD

For this trade, I got a premium of 271.2 USD (after commissions) or a 7.53% potential income return in 25 days, if options expire worthlessly

YTD this stock is down by almost 70%, it might be I’m trying to catch a failing knife here. Will see.

What happens next?

On the expiry date, August 27, 2021, RIDE is trading above $6 per share -  options expire worthlessly and I keep premium - if RIDE trades under $6 on the expiry date, I will get assigned 600 shares and will have to buy them for $3,600

But as I already have collected a premium of $0.45 per share, my break-even price for this trade then is $6-$0.45 = $5.55

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 3 shares with PFE stock. This purchase will contribute to my dividend portfolio on average an additional $0.33 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.