EWZ Analysis

iShares MSCI Brazil Index (EWZ)

Update 12/15/2016: EWZ remained unprofitable for much of its holding period. I exited a few days prior to expiration.

Shares declined by 7.7% over 17 days, or a -166% annual rate. The options position produced a 50.0% loss on debit for a -1,1074% annual rate


The trading idea comes of Ryan at Dough, who earned a 1.60 credit. The position diverges from my guidelines in that expiration is less than 30 days away. The implied volatility is also lower than my 50th percentile requirement. The width of iron condor is also narrower than what I usually allow. Let’s see how it works.

I shall use the DEC series of options, which trades for the last time 18 days hence, on Dec. 17.

Implied volatility stands at 38%, which is in the 31st percentile of its annual range. The price used for analysis was $34.07.

Iron condor, short the $34 calls and long the $36.50 calls,
short the $34 puts and long the $31.50 puts,
sold for a credit and expiring Dec. 17.
Probability of expiring out-of-the-money

DEC Strike OTM Δ
Upper 34 77.8% 52
Lower 31.5 82.6% 25

The premium is $1.61, which is 64% of the width of the position’s wings.

The risk/reward ratio is 0.6:1.

Decision for My Account

I have placed an order on EWZ as described above. The stock price at entry was $34.06,

Tim Bovee, Portland, Oregon, Nov. 28, 2016

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