SPCE – Naked Put – 4.33% potential return in 25 days

Updated: 16 May, 2020 seen 29

On April 27, 2020, I sold a naked put on SPCE stock with expiry in 25 days. This trade promises a potential return of 4.33%

SPCE is the stock I had in our portfolio since the late October 2019, unfortunately not all worked out as expected and our portfolio experienced a Margin Call in March 2020 (Covid-19 crisis), and SPCE was stock I sacrificed (as SPCE is not a dividend stock)

Now I have decided to take it back using puts. 

Here is my trade setup:

  • SLD 1 SPCE MAY 22 '20 12 Put Option 0.52 USD

For this trade, I got a premium of 52 USD (before commissions) or a 4.3% potential income return in 25 days.

So what happens next?

On expiry day (May 22, 2020) SPCE is trading above $12 per share - my options expire worthless and I keep premium - if SPCE trades under $12 on expiry date I  get assigned 100 shares of SPCE.

But as I already have collected premium of 0.52 per share, my break-even price for this trade then is 12-0.52 = $11.48

In other words, SPCE can fall from the current price of $17.8 way down to $11.48 and I will still be break even (that is the downside protection of about 55%)

Date Type Count Dividend Purchase Price Sale Price Stock Price Strike price Date ox Expiration Option Price Incoming
4/27/2020 STO PUT 1 x     18 12 05/22/2020 $0.52 $0.52

If assigned in the price range $11.50-$12 - I will sell covered calls; if expires worthless, will repeat and double; if SPCE falls below $11.50 till expiry will try to roll forward