Established Covered Calls Position in KraneShares CSI China Internet ETF

This afternoon a 3-week Covered Calls position was established in KraneShares CSI China Internet ETF (ticker KWEB). Five hundred shares were purchased at $26.29 and five April 5th, 2024 Call options were sold at the $25.50 strike price at $1.37 per share--a buy/write net debit transaction of $24.92 per share which provides a $.58 per share time value profit potential.  The Delta was 65.7 when this transaction occurred. 

Wall Street Analysts rate the top 10 positions in KWEB as having +21.5% upside potential from their current prices. From a valuation perspective, KWEB's trailing-twelve-months P/E ratio is only 18.4 which compares very favorably to the market-cap-weighted "magnificent 7" U.S. companies whose P/E is now in the mid 40s.

As detailed below, a potential result is +2.3% absolute return-on-investment (equivalent to +40.5% annualized return-on-investment for the next 21 days) if the KWEB share price is in-the-money (i.e. above the $25.50 strike price) and therefore assigned on its April 5th, 2024 options expiration date.

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

The Buy/Write transaction was as follows:
3/15/2024 Bought 500 shares of CSI China Internet ETF @ $26.29 per share.  
3/15/2024 Sold 5 KWEB April 5th, 2024 $25.50 Call options @ $1.37 per share.  The Implied Volatility of the Calls was 35.2 when this position was established.  

A possible overall performance result (including commissions) for this CSI China Internet ETF Covered Calls position is as follows: 

KWEB Covered Calls Net Investment: $12,313.35

= ($26.29 - $1.37) * 500 shares + $3.35 commission

Net Profit:
(a) Options Income: +$681.65
= ($1.37 * 500 shares) - $3.35 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 500 CSI China Internet ETF shares assigned at $25.50 strike price at expiration): -$395.00
+($25.50 - $26.29) * 500 shares

Total Net Profit Potential (If 500 CSI China Internet ETF shares assigned at $25.50 strike price at expiration): +$286.65
= (+$681.65 options income +$0.00 dividend income - $395.00 capital appreciation)

Potential Absolute Return-on-Investment: +2.3%
= +$286.65/$12,313.35
Potential Annualized Return-on-Investment: +40.5%
= (+$286.65/$12,313.35) * (365/21 days)