Business & Finance
Brazilian stock ETF outpaces Nasdaq-100 as options trading surges
A rebound in Brazilian equities and a spike in derivative volume have driven the iShares MSCI Brazil ETF to a 19% gain for the year.
The short version
- The iShares MSCI Brazil ETF has gained 19% year-to-date, surpassing the Nasdaq-100's 15% increase following a recent 12% rebound.
- Derivatives activity surged on Wednesday to over six times the 30-day average, placing the fund among the top 20 most traded securities in the options market.
- While high call activity indicates interest, heavy call selling alongside buying suggests traders may also be positioning for heightened volatility ahead of Brazil's October general election.
Key facts
- The iShares MSCI Brazil ETF (EWZ) has risen more than 12% from the prior month's low, bringing its year-to-date advance to 19% compared to the Nasdaq-100's 15%.[CNBC]
- Options volume on EWZ reached over six times its 30-day average on Wednesday, with midday volume exceeding 420,000 contracts.[CNBC]
- Call options accounted for 400,000 contracts compared to fewer than 30,000 put options, with $48 million of the $50 million total premium traded linked to calls.[CNBC]
- Implied volatility for EWZ increased from 0.28 to 0.39 over a three-week period, lifting option premiums to their highest levels since late June.[CNBC]
What remains uncertain
- Market analysts remain uncertain whether the rally is driven primarily by rising global commodity prices or political sentiment regarding Brazil's October general election.[CNBC]
- It is unclear whether heavy call volume represents an outright bullish bet or directionally neutral volatility-selling strategies, given that call selling closely matched call buying.[CNBC]