The Trade at a Glance
- Account Size: $100K
- Underlying Stock: Micron Technology Inc. ($MU)
- Strategy: Selling a Cash-Secured Put
- Action: Sold 1 Apr 17 $95 Put for $470 credit
Key Metrics
- Premium Collected: $470
- Expiration Date: April 17
- Strike Price: $95
- Break-Even Price: $90.30 ($95 strike – $4.70 premium)
- Obligation: If assigned, we will buy 100 shares of $MU at $95 per share.
Why This Trade Makes Sense
Generating Income with a Strong Yield
Selling puts generates instant premium income, offering a solid return on capital in just a few weeks.
Stock Acquisition at a Discount
If assigned, we buy MU at an effective price of $90.30, well below the current market price.
Capital Efficiency
A $100K account can efficiently use capital while preserving liquidity for additional trades.
Risk Management
- Max Loss Scenario: If $MU drops to zero, the potential loss is $9,530 ($9,500 – $470).
- Mitigation Strategy:
- Roll or close the put when it makes sense to secure profits or extend the trade for additional credit.
- Only trade if comfortable owning $MU long-term.
Final Thoughts
Selling cash-secured puts is a disciplined approach to generating income while maintaining control over entry points. For a $100K account, this MU trade provides a balanced risk-reward profile while leveraging premium collection.
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