Put Selling in Gerdau: Options

NEW YORK (TheStreet) -- At least one investor is calling for modest bullishness in steel and iron producer Gerdau S.A.(GGB Quote) one week prior to its earnings announcement.

Looking at the June 15 puts in GGB, more than 6,000 of these options hit the tape by the close Wednesday. Investors sold these puts for around $2.30 per contract with the stock trading around $15. These puts closed up 65 cents with a 48 delta, and are home to open interest of zero contracts.

Investors who sold these puts are betting the stock will hold higher than $12.70, but keep in mind that they expect the stock to drop or hold, which is why we call this limited bullishness. This represents a drop of 13% from current levels.

GGB shares closed down $1.30 to $14.59, and they have rallied 200% since their March lows of $4.72. We're not seeing any news out of the company that could have catalyzed the drop in stock.

GGB has not confirmed its earnings announcement date, but the market expects the report during the first couple of weeks in November. It's interesting that at least one investor is calling for a slight drop in the stock months after the earnings report.

Put selling like this is also sign of moderate bullishness, because investors are calling a floor in the stock. The investor is willing to cap his gain at $2.30 if the stock remains higher than $12.70, which explains why this trade banks on limited upside and limited downside.