Established Covered Calls Position in KraneShares CSI China Internet ETF

This afternoon a bi-weekly Covered Calls position was established in KraneShares CSI China Internet ETF (ticker KWEB). One thousand shares were purchased at $26.22 and ten January 19th, 2024 Call options were sold at the $25.50 strike price at $1.14 per share--a buy/write net debit transaction of $25.08 per share which provides a $.42 per share time value profit potential. 

This is clearly a contrarian position given that KWEB has declined by 66% over the past 3 years. But I agree with the 2024 best contrarian idea pick of both Bryn Talkington and Josh Brown on CNBC's Halftime Report that China Large-Cap Tech companies are their top contrarian idea for 2024.  In addition, Wall Street Analysts rate the top 10 positions in KWEB as having over 30% upside potential from their current prices. From a valuation perspective, KWEB's trailing-twelve-months P/E ratio is only 19.9 which compares very favorably to the market-cap-weighted "magnificent 7" U.S. companies which is now at a 47.7 P/E.

As detailed below, a potential return-on-investment result is +1.6% absolute return-on-investment (equivalent to +40.1% annualized return-on-investment for the next 15 days) if the KWEB share price is in-the-money (i.e. above the $25.50 strike price) and therefore assigned on its January 19th, 2023 options expiration date.

 
KraneShares CSI China Internet ETF (KWEB) -- New Covered Calls Position 

The Buy/Write transaction was as follows:
1/4/2024 Bought 1,000 shares of CSI China Internet ETF @ $26.22 per share.  
1/4/2024 Sold 10 KWEB Jan. 19th, 2024 $25.50 Call options @ $1.14 per share.  

A possible overall performance result (including commissions) for this CSI China Internet ETF Covered Calls position is as follows:
KWEB Covered Calls Net Investment: $25,086.70
= ($26.22 - $1.14) * 1,000 shares + $6.70 commission

Net Profit:
(a) Options Income: +$1,133.30
= ($1.14 * 1,000 shares) - $6.70 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 1,000 CSI China Internet ETF shares assigned at $25.50 strike price at expiration): -$720.00
+($25.50 - $26.22) * 1,000 shares

Total Net Profit Potential (If 1,000 CSI China Internet ETF shares assigned at $25.50 strike price at expiration): +$413.30
= (+$1,133.30 options income +$0.00 dividend income -$720.00 capital appreciation)

Potential Absolute Return-on-Investment: +1.6%
= +$413.30/$25,086.70
Potential Annualized Return-on-Investment: +40.1%
= (+$413.30/$25,086.70) * (365/15 days)