We are seeing some interesting action (or lack of action to be specific) in some of the Emerging Market ETF Implied Volatility measurements. Take a look...
|EWZ - MSCI Brazil ETF Implied Volatility since Inception at an ALL TIME LOW|
|Outside of what appears to be an anamoly in Oct. 2010, EWW - MSCI Mexico - made all time lows in IV last week|
|FXI China ETF at multi-year lows|
|RSX - Russian ETF is looking at multi-year lows|
|EWY - MSCI South Korea at extremely low levels of implied volatility|
|EEM - The MSCI Emerging Markeys ETF encompassing all major EM markets at an ALL TIME LOW in IV|
Many of these are high beta, therefore in some instances when you beta weigh the implied volatility of these ETFs, you find that owning volatility in these ETFs are cheaper than owning it in the SPY/SPX, almost as if the VIX was at 11 or 12.
There is nothing to say volatility cannot get cheaper but it won't go to zero and it will have some thresholds, high and low. With that said, and as I have made clear before, I do not know anything in these markets that are cheaper than EM volatility right now.
I currently own options spreads in EWZ, my favorite of them all. This is for four reasons: 1) it significantly underperformed all major equity ETFs I track last year; 2) it has the highest beta of all EM ETFs; 3) it's realized volatility is also at all time lows; and 4) it has been trading in a range which I think it could break out of within 2013.
I am not directionally biased on EWZ. My options are relatively delta neutral and I am long vega. I am positioned so I can maneuver around my current holding easily, allowing me to rework my spreads when needed (vol lift, vol drop).