The largest trade in the options pits today was a closing sale of 40,000 of the EWZ (iShares MSCI Brazil etf) that tracks Brazilian equities. When the etf was $27 a trader sold to close 40,000 of the Jan 2017 33 calls at 92 cents or collecting about $3.7 million in premium.
After closing very near its lows in 2015, down about 43% on the year, the EWZ has seen a sharp rebound in 2016 in sympathy with the bounce in oil, a commodity that the Brazilian economy is very tied to, and also the impeachment proceedings for their current socialist President Dilma Rousseff who some believe has been a massive drag on their economy. The EWZ is up 32% on the year, and up nearly 60% from its 52 week lows made in late January. A quick look a the one year chart shows the etf’s recent rejection at $30 and recent bounce off of $25, with the stock very near the midpoint of that range, it bang around between $25 and $30 for some time:
Which could be one reason this trade chose to sell to close these calls that would not break-even until $33.92, up nearly 25% from the trading levels on Jan expiration, causing options prices to continue to moderate. A quick look at 30 day at the money implied vol (blue below-the price of options) vs 30 day at the money realized volatility (white line below-how much the stock has been moving). The point here is that both are at 2016 lows, and if the etf were to settle down a bit, options prices might come in at least a few more points:
Lastly, the 7 year chart of the EWZ shows the very well defined downtrend from the 2010 highs, and despite the healthy bounce from the Jan lows, the etf remains in a nasty death spiral, another rejection at $30 and we might see low $20s again: