BEEM Call Credit Spread

Trade Idea: Create a Call Credit Spread on BEEM with a $12.5 strike price.

Explanation:
Let's break down this trade idea using simpler terms. "BEEM" refers to the stock symbol for Beam Global, a company involved in sustainable energy solutions. A Call Credit Spread is an options strategy that involves selling and buying call options on the same underlying stock but with different strike prices.

In this trade idea, we are suggesting creating a Call Credit Spread on BEEM with a $12.5 strike price. This means we believe the price of BEEM stock will not rise above $12.5 by a specific date. By executing this options strategy, we have the opportunity to potentially earn income from the premium received for selling the call options.

Now let's discuss risk management. Risk management is important in trading as it helps us protect our capital and minimize potential losses. In this trade, it is recommended to set a predetermined level, known as a stop loss, at which you would exit the trade to limit potential losses. The suggested stop loss for this trade is 25%, meaning if the value of the Call Credit Spread increases by 25% from its initial sale price, it is advised to exit the trade.

Reducing Risk:
Creating a Call Credit Spread helps reduce risk because it involves both selling and buying call options. By simultaneously selling a call option with a lower strike price and buying a call option with a higher strike price, we can limit our potential losses. The difference in the strike prices represents the maximum potential loss.

Potential Income:
If the price of BEEM stock remains below the $12.5 strike price before the options contract expires, both call options will likely decrease in value. This allows us to keep the premium received for selling the call options, which represents our potential income.

To summarize, creating a Call Credit Spread on BEEM with a $12.5 strike price allows us to potentially earn income by betting that the stock price will not rise above $12.5. Implementing a 25% stop loss helps manage risk by defining a level at which we exit the trade to limit potential losses. This options strategy reduces risk by involving both selling and buying call options, and the potential income comes from the premium received for selling the call options as long as the stock price remains below the strike price.