Sold 1 Credit Spread on EEM ETF – 0.56% potential income return in 7 days

On October 01, 2021, I sold 1 bull put credit spread on EEM ETF with an expiry set in the next 7 days. For this trade, I got a premium of $28.20 (after commissions)

The iShares MSCI Emerging Markets ETF seeks to track the investment results of an index composed of large- and mid-capitalization emerging market equities.

This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.

Here is the trade setup:

  • SLD 1 EEM OCT 08 '21 50 Put Option 0.45 USD

  • BOT 1 EEM OCT 08 '21 48 Put Option 0.12 USD

For this credit spread, I got a credit of 28.2 USD (after commissions) or a 0.56% potential income return in 7 days, if options expire worthlessly

What happens next?

On the expiry date, October 08, 2021, EEM is trading above $50 per share -  options expire worthlessly and I keep premium - if EEM trades under $50 on the expiry date, I will get assigned 100 shares and will have to buy them for $5,000

But as I already have collected a premium of $0.28 per share, my break-even price for this trade then will be $50-$0.28 = $49.72

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