On October 12th, investors in the iShares MSCI Emerging Markets ETF (EEM) will have new options available, including a put at a $63.00 strike price with a current bid of $0.01. If sold to open, this contract would require investors to buy shares at $63.00, effectively lowering their cost basis to $62.99, compared to the current trading price of $67.02. The $63.00 strike price represents about a 6% discount, with a 75% chance that the put will expire worthless.
Additionally, a call option is available at a $69.00 strike price, also with a bid of $0.01. If investors buy EEM at $67.02 and sell this call, they could achieve a total return of 2.97% upon expiration if the stock is called away. This call strike price reflects a 3% premium over the current price, with a 62% chance of expiring worthless.
The implied volatility for the put is 54%, while the call’s is 39%, in contrast to an actual trailing twelve-month volatility of 26% for EEM.
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