Trade Alert: Partial Roll Forward and Down 3 Credit Spreads on SDC –0.07% potential income loss in 74 days

On August 30, 2021, I did a partial roll forward and roll down on a credit spread I established at the end of July on SDC stock.

As the expiry was fast approaching and my strike prices were in the money ($6.5) I decided to roll forward and roll down at least some part of the contracts.

I rolled 3 out of 5 contracts and will take assignments on the rest 2 this Friday

Here is the trade setup:

  • SLD 3 SDC SEP 03 '21 - 6.5 + 5 Put Bull Spread -1.12 USD

  • BOT 3 SDC OCT 08 '21 - 6 + 4.5 Put Bull Spread -0.80 USD

Here I bought back 3 contracts with the strike prices of $6.5, for I paid in total $336 and sold 3 additional credit spreads with lower strike prices and with an expiry set in October. For this trade, I got $240 (before commissions)

I lowered the strike prices from $6.5 to $6.

What happens next?

On the expiry date, October 08, 2021, SDC is trading above $6 per share -  options expire worthlessly and I keep premium - if SDC trades under $6 on the expiry date, I will get assigned 300 shares

I actually will lose -$13.2 if options will expire worthlessly. New break-even price $6+$0.01 = $6.04

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