Trade Alert: Rolled Forward and Down EWZ Put Option +5.02% potential income return in 106 days

On November 04, 2021, I rolled forward and down a put option on the EWZ ETF I originally established back at the start of September.

The investment seeks to track the investment results of the MSCI Brazil 25/50 Index.

Get 50% off for 1 year

Despite there is still about 2 weeks until this put option expiry, I decided to take advantage of time decay and rolled early.

Here is the trade setup:

  • BOT 1 EWZ NOV 19 '21 35 Put Option 5.90 USD

  • SLD 1 EWZ DEC 17 '21 34 Put Option 6.68 USD

Here I bought back the $35 put option paying $590 and sold a new put option with a lower strike price ($34) and with an expiry set in the next December. For this trade, I got $668 (before commissions)5

What happens next?

On the expiry date, December 17, 2021, EWZ is trading above $34 per share -  options expire worthlessly and I keep premium - if EWZ trades under $34 on the expiry date, I will get assigned 100 shares

New break-even price $34-$1.71 = $32.29

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