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ewz: 02.24.20 – 05.12.20

ETF | Brazilian Equities | Status: Closed

Adjustment #4

View original trade
03.11.20
Yet another massive selloff has pushed my
to the decision point in EWZ. Unfortunately, my position is already severely
after a nasty 15%+ selloff the other day. Today, we have just about the same ugliness. My objective now is to trim my delta risk in half from about 50 down to 25. The problem is, in order to do so I'd need to
my
down to the 25
which is
for around a $3.50 credit. This would not only lock in an additional $2.50 of loss, but I'd also wind up with a $13 inversion without the benefit of increased
That idea totally sucks, so I'm getting a little more creative this time...
I've decided to roll my call down to the 30 strike, and my put down to the 33 for a $3.85 debit. Normally, I wouldn't roll for a debit but in this case I am actually benefitted in several ways. I now have a $3 inversion as opposed to a $7 inversion which means I was able to remove $4 of unattainable
for a $0.15 discount. That means that my best case scenario actually improved by $0.15. That may not be much, but it's better than locking in an additional $2.50 of loss. Secondly, this move allowed me to achieve my objective of reducing my delta risk by 50%. Third, it leaves me a little bit of intrinsic value to make back should the market rebound a bit. Lastly, I was able to increase my extrinsic value by $1.15. That's an extra $1.15 that I can potentially make back without relying on directional correctness.
The risks I am taking by making this adjustment are I am narrowing my strikes, which will mean a smaller sweet spot in which I have the potential to make back 100% of extrinsic value. It also moves my upside risk closer to the current share price giving me a higher chance of being
These are risks I am willing to take in order to keep my minimum loss as low as possible, as well as reduce my risk to the downside. If I do get whipsawed, my other positions will benefit and I have full confidence in my ability to handle that problem.

Risk Profile:

Figure 5

Strategy: Roll Down Put and Call

btc 1 apr 17 31 call
sto 1 apr 17 30 call
btc 1 apr 17 38 put
sto 1 apr 17 33 put
Fill Price: $3.85 debit

Position Analysis

U/L Price: $28.68
IV: 73.3%
IVR: 114.1
Liquidity: 4/4
Position: Short APR 17 30/33 Inverted Strangle
POP: 0%
Cost Basis: $1.63
Risk: Undefined
BPR: $1125
Max Profit: -$1.37
Max Loss: Unlimited
Extrinsic Value: $281.00
Net Delta: 26.46
Net Theta: 5.673

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