Brazil's Itau gets vote of confidence


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A large trader apparently thinks that Brazilian lender Banco Itau is on solid ground.

optionMONSTER's monitoring programs detected the sale of about 6,400 November 18 puts, most of which priced for $0.25. Volume was more than twice open interest in the strike.

The trades reflect a belief that the Brazilian lender has only limited downside. If it stays above the strike price through expiration, the investor will keep the credit and the contracts will expire worthless. Below $18, he or she will be forced to buy shares but, including the $0.25, for $17.75.

Selling puts
is a common strategy when investors like a stock but don't want to expend capital getting long. In the case of yesterday's trade it's also designed to profit from the accelerating pace of time decay that will occur in the next 1-1/2 weeks. (See our Education section)

ITUB rose 1.35 percent to $18.80 yesterday and is up 16 percent in the last month. The company reported better-than-expected earnings on Oct. 26 as loans grew and interest-rate cuts drove up the value of bond holdings.

Overall option volume in ITUB was more than twice the average amount in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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