New Options Trading for iShares MSCI Brazil ETF Shows Potential

Investors in the iShares Inc – MSCI Brazil ETF (Symbol: EWZ) witnessed the start of new options trading today for the July 18 expiration. With 84 days remaining until expiration, these new contracts provide an opportunity for put and call sellers to secure higher premiums compared to contracts with shorter timeframes.

According to Stock Options Channel, their YieldBoost formula has analyzed the EWZ options chain and identified two contracts worth noting: one put and one call. The put contract at the $26.00 strike price currently has a bid of 77 cents. If an investor sells-to-open this put, they agree to purchase shares at $26.00 while also collecting the premium, which lowers the effective cost basis to $25.23 (before commissions). For those looking to acquire shares of EWZ, this could present an appealing alternative to buying at the current price of $26.86 per share.

The $26.00 strike price represents a roughly 3% discount from the current trading value, indicating it is out-of-the-money by that amount. Analytical data suggests a 59% probability that this put contract will expire worthless. Stock Options Channel will monitor these odds over time, displaying updated data on their website. If the put contract does expire worthless, the premium can yield a 2.96% return on the cash commitment, which annualizes to 12.87%—a metric Stock Options Channel refers to as YieldBoost.

Below is a chart illustrating the trailing twelve-month trading history for the iShares Inc – MSCI Brazil ETF, highlighting where the $26.00 strike price lies:

On the call side, the contract at the $28.00 strike price is currently bid at 54 cents. By purchasing shares of EWZ at the market price of $26.86 and selling-to-open this call as a “covered call,” the investor commits to sell the shares at $28.00. When factoring in the premium collected, this could lead to a total return of 6.25% if the stock is called away at the July 18 expiration date (excluding potential dividends and commissions). However, significant upside may remain if EWZ shares rise substantially, making it critical to assess the ETF’s historical performance and business fundamentals. Below is the chart of EWZ’s trailing twelve-month trading history, with the $28.00 strike highlighted in red:

The $28.00 strike corresponds to an approximate 4% premium over the current trading price, marking it as out-of-the-money by that percentage. There is also a 62% likelihood that the covered call could expire worthless, allowing investors to retain their shares and keep the premium earned. Should the covered call expire worthless, the premium represents a 2.01% increment in return for the investor, or an annualized 8.74%—another YieldBoost calculation from Stock Options Channel.

The implied volatility for the put contract stands at 62%, while the call contract shows 28% implied volatility. Our analysis of trailing twelve-month volatility, based on the last 250 trading days and today’s price of $26.86, is 25%. For additional options contract opportunities, Stock Options Channel provides further insights.

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The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Nasdaq, Inc.