Established Cash-Secured Puts Position in iShares MSCI Emerging Markets ETF

Today, ten 100% Cash-Secured Put options were sold in the iShares MSCI Emerging Markets ETF (ticker EEM) at the March 19th, 2021 $52.00 strike price at $.44 per share when EEM's price was $53.13. This out-of-the-money position has a probability of expiration of 69.9% at the options expiration date. Cash-Secured Puts were sold instead of their comparable Covered Calls in this case.  The time value available was an identical $.44 for either position so the positions (Cash-Secured Puts or Covered Calls) had identical risk/reward profiles.

As detailed below for this EEM 100% Cash-Secured Puts position, there is potential for a +0.8% absolute return in 10 days (equivalent to a +30.7% annualized return-on-investment). 

 

iShares MSCI Emerging Markets ETF (EEM) -- New 100% Cash-Secured Puts Position
The transaction today was as follows:
03/10/2021  Sold 10 EEM March 19th, 2021 $52.00 100% Cash-Secured Put options @ $.44 per share.

The Covered Calls Advisor does not use margin, so the detailed information on this position and the potential result detailed below reflect that this position was established using 100% cash securitization for the ten Put options sold.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Put Cost Basis: $51,566.75
= ($52.00 - $.44) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$433.30
= ($.44 * 1,000 shares) - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If EEM is above $52.00 strike price at the March 19th expiration): +$0.00
= ($52.00 - $52.00) * 1,000 shares

Total Net Profit (If EEM is above $52.00 strike price at options expiration): +$433.30
= (+$433.30 option income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return: +0.8%
= +$433.30/$51,566.75
Annualized Return: +30.7%
= (+$433.30/$51,566.75)*(365/10 days)

The downside 'breakeven price' at expiration is at $51.56 ($52.00 - $.44), which is 3.0% below the current market price of $53.13.