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.
|EWZ – iron fly||Strike||Odds||Delta|
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