Brazil is en fuego, as Market Insights highlighted yesterday. But this session options traders are fading the rally in a key name.
Itau Unibanco (ITUB), the country’s biggest lender, is up 7.49 percent to $12.34 in afternoon trading. The gains come amid optimism that a pro-business candidate will get elected president.
Roughly 20,000 November 14 calls were sold in ITUB, mostly for $0.45. Volume was well above open interest, which indicates new positions were initiated.
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Owning calls fixes the price where a stock can be purchased but selling them obliges the investor to deliver shares if they’re above a certain level. Given the risk of naked-call writing, there’s a good chance today’s trader owns ITUB stock and is using the options as a limited hedge. (See our Knowledge Center.)
It could make sense technically because ITUB is back to the same $12.50 area where it stalled in July and August. That could make some chart watchers expect resistance to slow further gains.
The trade pushed overall options volume in the company to about triple its average over the last month, according to RadarScreen®.