Investors in the iShares China Large-Cap ETF (FXI) gained access to new options contracts expiring on December 31st. A notable put contract at the $37.00 strike price has a current bid of $2.08, providing an opportunity to buy shares at an effective cost of $34.92, approximately 7% below the current market price of $39.63. The likelihood of the put contract expiring worthless stands at 66%, potentially yielding a 5.62% return on the cash commitment if it does.
On the calls side, a contract at the $46.00 strike has a bid of $1.53. Investors looking to sell this covered call could achieve a total return of 19.93% if the stock is called away by expiration. This strike price represents a 16% premium over the current market value, with a 61% chance of the option expiring worthless, allowing the investor to retain both the shares and the premium, translating to a 3.86% annualized return.
Implied volatilities for the put and call contracts are 31% and 32%, respectively, while the actual trailing twelve-month volatility has been calculated at 26%.
