Trade Alert: Roll Forward and Down EWZ Put Option +2.8% potential income return in 79 days

On September 20, 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 the assignment this Friday.

Here is the trade setup:

  • BOT 1 EWZ SEP 24 '21 35.5 Put Option 3.30 USD

  • SLD 1 EWZ NOV 19 '21 35 Put Option 3.70 USD

Here I bought back the $35.5 put option paying $330 and sold a new put option with a lower strike price ($35) and with an expiry set two months later. For this trade, I got $370 (before commissions)

I lowered the strike prices from $35.5 to $35

What happens next?

On the expiry date, November 19, 2021, EWZ is trading above $35 per share -  options expire worthlessly and I keep premium - if EWZ trades under $35 on the expiry date, I will get assigned 100 shares

New break-even price $35-$0.98 = $34.02

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