For a spicy garnish, combine salt and chili powder in a saucer. Dip rims of glasses in lime juice or water, and dip in salt mixture to coat.
Prep: 10 minutes; Chill: 1 hour
Puree watermelon, in batches, in a blender or food processor. Pour puree through a wire-mesh strainer, pressing with the back of a spoon; discard pulp and seeds.
Combine watermelon liquid, tequila, and next 4 ingredients in a large pitcher. Cover and chill 1 hour (longer for a stronger pepper flavor). Serve over ice. Garnish, if desired.
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