The departure of the PMDB party from President Dilma Rousseff’s coalition means that an impeachment vote against the President now looks a lot more likely. In fact, the vote could come as early as mid-April.

However the vote is by no means a foregone conclusion. President Rousseff requires 172 votes to block impeachment, and with the support of smaller parties (PP, PSD) around 180 votes could theoretically support the incumbent. Whether that support can actually be counted upon remains to be seen.

Markets are thoroughly impressed with the prospect of an end to the current government.

USD-BRL trades nearly 14% below its 2016 peak and market rates show that investors are betting that the change in government will allow BCB to start cutting rates and more fiscal consolidation to improve Debt-to-GDP ratio.

Overall, as we've seen dips from the peaks of 4.2476 to the current 3.5637 levels (almost 16.11%), which makes the BRL the "7-month highs" in just a span of one month and we could still more strength in BRL.

So, hedge FX risk of BRL by buying USD/BRL 1Y ATM vs sell 18M 25D strangle, 1:2 vega

If puts are overpriced relative to calls, the arbitrager would sell a naked put and offset it by buying a synthetic puts. Similarly, vice versa when you think calls are getting overpriced in relation to puts.

Arbitration can also possible through box spreads where buying debit call spreads and debit put spreads for a risk-free returns. The opportunity for arbitrage in options market exists once in blue moon for individual investors as price discrepancies often appear only for a few moments.