EWZ Analysis

iShares MSCI Brazil Capped (EWZ)

Update 4/19/2017: EWZ continued a sideways correction that began in early March as time decay worked to bring the position to profitability. I exited at 18.2% of maximum profit.

Shares showed a net decline of 3.1% over 21 days, or a -54% annual rate. The options position produced a 22.3% yield on debit for a +387% annual rate.


 

EWZ, an exchange-traded fund, has sufficiently high implied volatility to support a trade for the nearer term, although it is quite low compared to the annual range.

I shall use the MAY series of options, which trades for the last time 51 days hence, on May 19.

Implied volatility stands at 32%, which is double the VIX, a measure of the volatility of the S&P 500 index.

EWZ’s IV stands in the 25th percentile of its annual range and the 75th percentile of its most recent broad movement.

The price used for analysis was $37.81.

Premium: $2.80 Expire OTM  
EWZ – iron fly Strike Odds Delta
Calls
Long 42.00 85.4% 17
Break-even 39.80
Short 37.00 45.9% 59
Puts
Short 37.00 54.6% 41
Break-even 34.20
Long 33.00 82.6% 14

The premium is 62% of the width of the position’s wings.

The risk/reward ratio is 0.8:1.

Decision for My Account

I have entered a position on EWZ as described above. The stock at the time of entry was priced at $37.80.

By Tim Bovee, Portland, Oregon, March 29, 2017

2 thoughts on “EWZ Analysis

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