Trade Adjustment: Rolled Forward and Down 2 NKLA Credit Spreads -1.26% potential income loss in 153 days

On November 29, 2021, I rolled forward and down 2 credit spreads on the NKLA stock, I originally established back at the start of November 2021.

Sold 2 Credit Spreads on NKLA – 2.93% potential income return in 24 days

As the expiry date approached (December 03, 2021) and NKLA stock was in the money, and not wanting yet to turn this trade into a covered call or to close with a loss, I decided to roll it out and avoid the assignment this Friday.

Here is the trade setup:

• BOT 2 NKLA DEC 03 '21 12 Put Option 2.01 USD

• SLD 2 NKLA DEC 03 '21 10 Put Option 0.37 USD

• SLD 2 NKLA APR 14 '22 9 Put Option 1.97 USD

• BOT 2 NKLA APR 14 '22 6 Put Option 0.70 USD

Here I bought back the $12/$10 credit spread put and sold a new credit spread with lower strike prices ($9/$6 and with an expiry set in April 2022.

What happens next?

On the expiry date, April 14, 2022, NKLA is trading above $9 per share -  options expire worthlessly and I keep premium - if NKLA trades under $9 on the expiry date, I will get assigned 200 shares

New break-even price $9+0.12 = $9.12

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