Update – EEM Nov Put Spread

by riskreversal November 10, 2016 10:07 am • Trade Updates

On August 16th we positioned for a pullback in emerging market stocks after its 36% rally from its 2016 lows. Our thought process at the time was to sell near term puts in order to finance November puts with the assumption that we’d see an uptick in volatility in the Fall out of what was a historically low period of volatility in August. Here was the original trade:  

*Buy the EEM (37.70) Sept 2nd/ November 36 put spread for .70
  • Sell 1 Sept2nd 36 put at .15
  • Buy 1 Nov 36 put for .85

A few weeks later, with EEM down about a dollar, we closed the short put in September and rolled it to create a vertical put spread in November. Here was that trade update:

Action: vs long EEM ($36.50) Nov 36 puts

  • Bought to Close the Sept 2nd 36 puts for .13
  • Sold to open the November 33 puts at .43
New Position – Long the Nov 36/33 put spread for .40

Emerging markets stocks are lower from both the entry and the roll. Now with the EEM 35.50 our trade is profitable, but the mark to market value here is more than the intrinsic value so there’s risk to the profits if the etf closes at this level or above. We’ll take the profits here and move on:


Sold to close the EEM (35.60) Nov 36/33 put spread at .75 for a .35 profit
  • sold to close 1 Nov 36 put at .80
  • bought to close 1 Nov 33 put for .05