New Trading Options Available for iShares Russell 2000 ETF

Investors in the iShares Trust – iShares Russell 2000 ETF (Symbol: IWM) noticed the launch of new options trading today, focused on the May 21st expiration. Notably, Stock Options Channel’s YieldBoost formula has identified key put and call contracts that may be of interest.

Put Contract Insights

The put contract available at the $195.00 strike price has a current bid of $2.84. By selling-to-open this put contract, an investor agrees to buy the stock at $195.00 while collecting the premium. This results in a cost basis of approximately $192.16 per share, before broker commissions. For investors looking to buy IWM shares, this may be an appealing alternative to the current trading price of $196.77 per share.

The $195.00 strike price is about a 1% discount to the current trading price, indicating that the contract is out-of-the-money by that percentage. Current analysis shows a 62% chance that this put contract could expire worthless. The Stock Options Channel plans to monitor these odds over time and will provide updated charts on its website.

If the contract does expire worthless, the premium collected would yield a 1.46% return on the cash commitment, which annualizes to 37.97%. This is referred to as the YieldBoost.

Call Contract Opportunities

On the calls side, the contract at the $200.00 strike price is currently bid at $3.19. If an investor purchases IWM shares at $196.77 and sells this call contract as a “covered call,” they commit to selling the stock at $200.00. Including the premium collected, the total return—excluding any dividends—would be 3.26% if the shares are called away by the May 21st expiration.

However, if IWM shares rise substantially, the investor may miss out on potential gains. Therefore, examining the trailing twelve-month trading history is important. The $200.00 strike price represents a 2% premium to the current trading price, meaning the contract is also out-of-the-money by that percentage. Current data indicate a 56% probability that the covered call could expire worthless, allowing the investor to retain both their shares and the premium collected.

Should the covered call expire worthless, the premium collected would correspond to an extra 1.62% return for the investor, or 42.27% annualized, also classified as a YieldBoost.

Volatility Insights

The implied volatility for the put contract stands at 28%, while the call contract’s implied volatility is at 26%. In context, the actual trailing twelve-month volatility, calculated from the last 250 trading days and the current share price of $196.77, is 24%. Investors seeking additional options insights may find value in exploring more put and call contract ideas.

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