Today, iShares Trust – iShares Russell 2000 ETF (Symbol: IWM) introduced new options contracts set to expire on January 16th. At Stock Options Channel, we’ve examined the options chain to highlight one notable put and one call contract for investors to consider.
Put Option Details: $221 Strike Price
The $221.00 strike price put contract currently has a bid of $2.58. By selling-to-open this put, an investor would agree to buy the stock for $221.00 while also securing the premium. This leads to an effective cost basis of $218.42 (before commissions). For those interested in acquiring IWM shares, this represents a potential savings compared to the current share price of $222.46.
Notably, the $221.00 strike is about a 1% discount off the latest trading price, meaning it is currently out-of-the-money by that margin. Analyses suggest that there’s a 59% chance that this put could expire worthless. As we track these metrics, updated graphs will be available on our website to visualize changes in these probabilities over time. Should the contract indeed expire without value, the premium could yield a return of 1.17% on the cash commitment, or an impressive 32.78% annualized—what we refer to as the YieldBoost.
Below, find a chart displaying the past twelve months of trading for the iShares Russell 2000 ETF, with the $221.00 strike indicated:
Call Option Insights: $224 Strike Price
On the call side, the $224.00 strike price has a current bid of $3.04. If an investor buys IWM at the current price of $222.46 and sells-to-open this call, they agree to sell the stock at $224.00. Including the premium, this would achieve a total return of 2.06% if the shares are called away by the January 16th expiration (before commissions). However, if IWM shares rise significantly, the investor may miss additional profits, underscoring the importance of reviewing both the ETF’s trading history and its core fundamentals.
Below is the chart demonstrating IWM’s trading history, with the $224.00 strike price highlighted:
The $224.00 strike represents about a 1% premium to the current trading price, indicating the possibility that this covered call could also expire worthless. Currently, there’s a 54% chance of this scenario. As before, we will be tracking these probabilities over time on our website. If the contract expires worthless, the investor retains both the shares and the premium, yielding a 1.37% additional return, or an annualized 38.37%, which we label as YieldBoost.
Implied volatility for both the put and call contracts stands at approximately 21%. Our calculated actual volatility, based on the previous 251 trading days and today’s price of $222.46, is also about 21%. For more insights into additional put and call options worth considering, visit StockOptionsChannel.com.
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Additional Resources:
- Warren Buffett Bank Stocks
- USOY Options Chain
- CNY Historical Stock Prices
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
