Back Derivatives Strategy

Own Longer-Dated Brazil (EWZ) Calls as a Way to Position for Meaningful Upside

Published on June 3, 2025

Jeff Jacobson

After reading Jordi Visser’s note on Brazil today (here), I couldn’t help but think how attractive longer-dated EWZ upside calls look to play out his bullish view. Looking at the 6-month 10% upside call vol, we see it trading ~ 24 (and down from the highs ~ 36 in April). At the same time, because of the significant volatility EWZ has had of late, the implied vol is trading just above its cheapest skew to 180-day realized vol (see below). This combination of “cheaper” implied vol, while realized vol remains much higher, makes owning longer-dated calls an attractive proposition here in my opinion, and a good way to add limited-risk upside exposure (especially given the reasons Jordi laid out as to why Brazil could really start to see meaningful upside).

Trade:
Buy EWZ Jan 30 calls for $1.12 – $1.14 (EWZ 27.52 ref)

Trade Details:

Buying the Jan (7-month) 9% upside calls in EWZ to gain/add upside equity exposure
Seeing longer-dated upside call vol trade back near the recent lows and at a significant discount to 180-day realized vol
22V’s Jordi Visser laid out his reasons why Brazil shares could see a huge push higher over the coming months in his note today
A breakout above the 30 level before January would also likely signal a change in trend from the 2021 highs downtrend resistance
Prefer Jan 2025 expiry as that has been the best month for EWZ of late (5.1% average gain in Jan over the last 4 years, including 2 moves higher of 12.5% or more)
Calls can be added to an existing bullish/long exposure to Brazil, or as a limited-risk entry-point trade into the country
Please contact me or the 22V sales team for updated pricing and execution capabilities

EWZ 6-month 10% upside call implied volatility near the recent lows ~ 24 and down from a recent high ~ 36

EWZ 6-month implied vol trading at a sharp discount to 6-month (180-day) realized vol (bottom chart)

Buying the Jan 30 calls – targeting a decided breakout above the 2021-2025 downtrend

January has been the best month for EWZ over the last few years – why I prefer to own Jan calls over traditional 6-month (Dec) here

DISCLOSURES AND DISCLAIMERS

Analyst Certification

The analyst, 22V Research Group, primarily responsible for the preparation of this research report attests to the following: (1) that the views and opinions rendered in this research report reflect his or her personal views about the subject companies or issuers; and (2) that no part of the research analyst’s compensation was, is, or will be directly related to the specific recommendations or views in this research report.

Analyst Certifications and Independence of Research.

Each of the 22V Research analysts whose names appear on the front page of this report hereby certify that all the views expressed in this Report accurately reflect our personal views about any and all of the subject securities or issuers and that no part of our compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views of in this Report.

22V Research (the “Company”) is an independent research provider. The Company is not a member of the FINRA or the SIPC and is not a registered broker dealer or investment adviser. 22V Research has no other regulated or unregulated business activities which conflict with its provision of independent research.

22V Research, LLC is a professional services and independent publication organization. 22V Research, LLC is not a securities broker-dealer, not a member of the Financial Industry Regulatory Authority (FINRA), not a registered investment advisor (RIA) and not a member of SIPC.

Securities transactions, when offered, are offered by 22V Securities, LLC through LPS Capital, LLC. Certain employees of 22V Securities, LLC are dually registered as securities representatives of LPS Capital, LLC or Analyst Hub Securities, LLC. 22V Securities, LPS Capital and Analyst Hub Securities are members FINRA, SIPC.

https://brokercheck.finra.org/

Current Ratings Definition.

SECTOR OUTPERFORM: An “outperform” rating anticipates the company will outperform the S&P Regional Banking Index (peer group).

SECTOR PERFORM: A “market perform” rating anticipates the company will perform in line with the S&P Regional Banking Index (peer group).

SECTOR UNDERPERFORM: An “underperform” rating anticipates the company will underperform the S&P Regional Banking Index (peer group).

Limitation Of Research And Information.

This Report has been prepared for distribution to only qualified institutional or professional clients of 22V Research Group. The contents of this Report represent the views, opinions, and analyses of its authors. The information contained herein does not constitute financial, legal, tax or any other advice. All third-party data presented herein were obtained from publicly available sources which are believed to be reliable; however, the Company makes no warranty, express or implied, concerning the accuracy or completeness of such information. In no event shall the Company be responsible or liable for the correctness of, or update to, any such material or for any damage or lost opportunities resulting from use of this data. Nothing contained in this Report or any distribution by the Company should be construed as any offer to sell, or any solicitation of an offer to buy, any security or investment. Any research or other material received should not be construed as individualized investment advice. Investment decisions should be made as part of an overall portfolio strategy and you should consult with a professional financial advisor, legal and tax advisor prior to making any investment decision. 22V Research Group shall not be liable for any direct or indirect, incidental or consequential loss or damage (including loss of profits, revenue or goodwill) arising from any investment decisions based on information or research obtained from 22V Research Group.

Reproduction And Distribution Strictly Prohibited.

No user of this Report may reproduce, modify, copy, distribute, sell, resell, transmit, transfer, license, assign or publish the Report itself or any information contained therein. Notwithstanding the foregoing, clients with access to working models are permitted to alter or modify the information contained therein, provided that it is solely for such client’s own use. This Report is not intended to be available or distributed for any purpose that would be deemed unlawful or otherwise prohibited by any local, state, national or international laws or regulations or would otherwise subject the Company to registration or regulation of any kind within such jurisdiction.

Copyrights, Trademarks, Intellectual Property.

22V Research Group, and any logos or marks included in this Report are proprietary materials. The use of such terms and logos and marks without the express written consent of 22V Research Group is strictly prohibited. The copyright in the pages or in the screens of the Report, and in the information and material therein, is proprietary material owned by 22V Research Group unless otherwise indicated. The unauthorized use of any material on this Report may violate numerous statutes, regulations and laws, including, but not limited to, copyright, trademark, trade secret or patent laws.