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.

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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