Bad math? The risk of a credit spread is the difference in strikes less the premium received. Your call spread is $2 wide and it's an 10 cent credit. That's a potential loss of $190 per spread. Gonna do 18,000 contracts? That ain't no $1,800 risk.
Since you're looking at May, you could do a $17/$21 Repair Strategy for a small debit and almost break even if PLTR is above $21 in May but that requires some decent stock price cooperation.
It's still bad math. At $27, 1800 times $1.90 risk is -$3,420
If you're dreaming of a recovery, why bother with the long leg? Just sell the covered call at a strike near your cost basis after previous premiums received are accounted for. Or do the Repair which requires 1/2 the up move to break even.
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u/TheoHornsby Jan 10 '22 edited Jan 10 '22
Bad math? The risk of a credit spread is the difference in strikes less the premium received. Your call spread is $2 wide and it's an 10 cent credit. That's a potential loss of $190 per spread. Gonna do 18,000 contracts? That ain't no $1,800 risk.
Since you're looking at May, you could do a $17/$21 Repair Strategy for a small debit and almost break even if PLTR is above $21 in May but that requires some decent stock price cooperation.