Trade Alert: Roll Forward and Down EWZ Put Option +2.03% potential income return in 23 days

On September 10, 2021, I rolled forward and rolled down a put option on EWZ ETF I originally established at the start of September

As the expiry date approached and EWZ was in the money, and not wanting yet to turn this trade into a covered call, I decided to roll it out and avoid assignment today

Here is the trade setup:

  • BOT 1 EWZ SEP 10 '21 36 Put Option 0.66 USD

  • SLD 1 EWZ SEP 24 '21 35.5 Put Option 1.06 USD

Here I bought back the $36 put option paying $66 and sold a new put option with a lower strike price ($35.5) and with an expiry set two weeks later. For this trade, I got $106 (before commissions)

I lowered the strike prices from $36 to $35.5.

What happens next?

On the expiry date, September 24, 2021, EWZ is trading above $35.5 per share -  options expire worthlessly and I keep premium - if EWZ trades under $35.5 on the expiry date, I will get assigned 100 shares

New break-even price $35.5-$0.72 = $34.78

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