A short-term Covered Calls position was established yesterday afternoon in KraneShares CSI China Internet ETF (ticker KWEB). Nine hundred shares were purchased at $26.14 and nine August 30th, 2024 weekly Call options were sold at the $25.50 strike price at $.93 per share--a buy/write net debit transaction of $25.21 per share which provides a maximum $.29 per share time value profit potential. The probability of the Calls being in-the-money on the options expiration date was 67.9% when this transaction occurred.
As detailed below, a potential result is +1.1% absolute return-on-investment (equivalent to +41.0% annualized
return-on-investment for the next 10 days) if the KWEB share price is in-the-money (i.e. above the $25.50 strike price) and therefore assigned on its August 30th, 2024 options expiration date.
KraneShares CSI China Internet ETF (KWEB) -- New Covered Calls Position
The Buy/Write transaction was as follows:
8/20/2024 Bought 900 shares of CSI China Internet ETF @ $26.14 per share.
8/20/2024 Sold 9 KWEB August 30th, 2024 $25.50 Call options @ $.93 per share. The Implied Volatility of the Calls was 29.4 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: $22,695.03
= ($26.14 - $.93) * 900 shares + $6.03 commission
Net Profit:
(a) Options Income: +$830.97
= ($.93 * 900 shares) - $6.03 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 900 CSI China Internet ETF shares assigned at $25.50 strike price at expiration): -$576.00
+($25.50 strike price - $26.14 shares purchase price) * 900 shares
Total Net Profit Potential (If 900 CSI China Internet ETF shares are assigned because they are in-the-money at the options expiration date): +$254.97
= (+$830.97 options income + $0.00 dividend income - $576.00 capital appreciation)
Potential Absolute Return-on-Investment: +1.1%
= +$254.97/$22,695.03
Potential Annualized Return-on-Investment: +41.0%
= (+$254.97/$22,695.03) * (365/10 days)
