Trade Alert: Roll Forward and Down EWZ Put Option +1.8% potential income return in 37 days

On October 06, 2021, I rolled forward and rolled down a put option on the EWZ ETF I originally established at the end of September. This is already the second time I'm rolling this trade out.

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 OCT 08 '21 32.5 Put Option 1.30 USD

  • SLD 1 EWZ OCT 29 '21 32 Put Option 1.58 USD

Here I bought back the $32.5 put option paying $130 and sold a new put option with a lower strike price ($32) and with an expiry set 3 weeks later. For this trade, I got $158(before commissions)

What happens next?

On the expiry date, October 29, 2021, EWZ is trading above $32 per share -  options expire worthlessly and I keep premium - if EWZ trades under $32 on the expiry date, I will get assigned 100 shares

New break-even price $32-$0.57 = $31.43

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