Nice call Nancy. Was going to IB chat you on this but figured it would be more relevant here. Have been tracking Brazil ever since you mentioned this a month ago , situation does not look good IE. Petrobras highlighting some of the main issues your spoke about in the video. “Price for perfection” in an very imperfect environment. Feel free to come back for more ideas haha.

Thank you, Ryan, I appreciate your post.

Thank you, Ryan, I appreciate your post.

Hi Ariel, I wanted to respond to some of your comments below: 1) Inflation is dead as we look in back the mirror. The economy is doing poorly, but inflation pass through effects from the currency depreciation, higher gas prices and the side effects from the truckers strike could push inflation higher with little growth to show. 2) This Central Bank is, by construction, Hawkish - No questions. - So?? 3) Wrong, This is no longer the case. The disbelief with the political class is so high that re-election or election of old politicians will be very difficult in 2018. MDB has a big problem this year with Temer’s enormous disapproval rate. Anecdotally, one off duty police officer that killed a thief became very popular in the past couple weeks and recently decided to run for the house – these are the kinds of candidates that are getting traction these days. The truckers’ strike started on May 21 after a government-sanctioned hike in diesel prices. But it quickly grew into something much bigger. WhatsApp posts showing striking truckers videos and other messages are calling for an end to Temer’s government. Bolsonaro has vowed if elected to appoint military officials to the cabinet positions, roll back human rights provisions and give security forces carte blanche to kill suspected criminals. Gen. Joaquim Silva e Luna, whom Temer appointed, told Bloomberg that he welcomed Bolsonaro's candidacy and Brazil is looking for someone with "values." 4 and final) That is indeed a good strategy specially now that the rate differential makes the carry less punitive. The currency is vulnerable to shocks, vol tends to spike, skew tends to rise. But with equities no longer being cheap, EWZ gets you both the currency and equities, with an attractive low correlation of ~25% earlier in May. During periods of crisis this correlation can jump up, further increasing the EWZ implied vol. A 25D USDBRL call would be up ~115% only in the same period compared to ~400% in EWZ put. There was little sign of any political consensus that could bring the difficult reforms and bold investments that Brazil needs to recapture the promise it showed last decade.

Banks were also bearish about Lula in Brazil years ago and we made a killing going long.

I really agree with this comment - her option understanding seems terrific and I would love her to do some training for us!

Whether or not Nancy does any option training presentations for RV in the future, you might get some of that (about options) from BigPicture Trading http://bigpicturetrading.com/. BigPicture's 'prime mover' is Canadian Patrick Ceresna. Patrick is now co-host of Erik Townsend's 'Macrovoices' weekly podcast.

Also, the CBOE (primary exchange for options on US-listed underlyings) has lots of options trading educational material. All, or almost all retail brokerages (Schwab, TD, Interactive Brokers, Fidelity, etc) have options training content. As does Investopedia.

Fabulous! Thank you!

Totally agree

We do not care for calendar spreads because that means selling one part of the vol curve to fund buying another part. Buying a calendar spread means you are selling gamma in the closer dated option contract to fund buying the longer dated contract. It's dangerous to do with a short exposure because in periods of risk off the vol curve in equities typically inverts meaning front dated vols move up more than longer dated vols.

We prefer to own maximum gamma using ATM options for days like today... Then with large moves like today's down 3.7%, and then we manage our strikes and delta by rolling down. Options are not buy and hold. they need active management!

What were the correct expiry and price?

hi John, 6 month implied vol on EWZ has been in the range of 17.5 to 93.5 over the past decade. Currently the vol is priced around the 50th percentile but the skew for downside is even cheaper at about the 18th percentile. therefore we believe that owning the convexity is better than using put spreads that sell skew.

Thanks Nancy. The implied vol range and current vol help me better understand your thesis. I like the trade idea and will look for an opportunity to put it on on an EWZ bounce.

BTW, I assume the host grabbed a near term option mistakenly, because the 60 cents at the money doesn't make any sense.

it is most def not 60 cents, the guy made a mistake.