Unusual Options Activity: Petroleo Brasileiro (PBR)

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Shares of
Petroleo Brasilerio (PBR), Brazil’s state-owned oil company, have been moving higher in recent sessions, following the price of oil higher. At least one trader sees that trend continuing.

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  • That’s based on the July 9 $13 calls. Expiring in 21 days, over 77,720 contracts traded against a prior open interest of 245, for a 317-fold explosion higher in interest. The buyer of the calls paid about $0.13 on average.

    With shares just under $12, it would take a return of about 10 percent in just three weeks for the option to trade in-the-money at expiration.

    Shares of the company have performed about in-line with the S&P 500 over the past year. While other companies have returned better, Petrobras has seen its shares take a few hits on various government moves, such as setting the price of gasoline in the country.

    Nevertheless, shares still trade with a 23 percent profit margin, an excellent return for a commodity business.
    Action to take: As with many other oil plays, the trend is in favor of higher prices. That may be clearer with a US-based energy company given the summer driving season in North America.

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  • Nevertheless, for an inexpensive trade on oil prices really taking off, this trade could do well. Its low price could return triple-digit gains, but could also go to zero given the short timeframe. Traders may want to look for a quick double-digit return in the coming days and then get out of the trade.

     
    Disclosure: The author of this article has no position in the stock mentioned here, but may make a trade in this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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