STONECO: Brazil's Fintech Fiesta (-22%)

When The Free Market Says Go Fugg Yourself.

Executive Summary

• Adopted a long wide strangle strategy, rolling the call down and out in time while maintaining original risk levels.

• Escaped with a -22% return, highlighting the unpredictable nature of short to mid-term directional plays.

Recap Situation

StoneCo rebounded from a steep price drop, achieving significant revenue, volume, and customer growth. We adopted a long, wide strangle strategy, leveraging the low premium for balanced risk-reward.

However, an overly ambitious maturity date led to a fast decline in our option premium. We responded by extending the call to January 2024 and dropping the put hedge, converting the position to a straight long call while preserving the initial risk level.

See the updated article below for further details.

STONECO: Brazil's Fintech Fiesta (UPDATE)

Why Now

Navigating this ride underscores the risks of short to mid-term directional plays. Despite probabilities and careful analysis, outcomes can be unpredictable, and we take a small hit on our “lottery ticket”.

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