By Jud Pyle, CFA, chief investment strategist for the
Itau Unibanco Holding
have nearly doubled since early March (the shares sank to $8.57), and at least one investor continued to be bullish on the Brazilian bank Wednesday.
Looking at the June 17.5 calls, more than 21,000 of these contracts traded vs. open interest of 1,300. This computes to an implied volatility of 59.5. These calls climbed 15 cents on the day. Approximately 3,500 Itau Unibanco options trade on a normal day. Yesterday, more than 35,000 options changed hands, according to ONN.tv's Sidewinder report.
During midday trading Wednesday, an investor bought more than 16,100 June 17.5 calls at 46 cents when the stock was trading at $16.07. This investor could be taking a bullish stance and needs Itau Unibanco shares to expire higher than $17.96 to make money on this trade.
On Tuesday, Bank of America analyst Jorg Friedemann raised Brazil's largest bank to buy from neutral, which translates to other analysts' sentiment that Brazilian banks' shares are attractive because of the country's focus on domestic activity. That news sent Itau Unibanco stock on a rally to $16.18 yesterday, but the shares dropped 11 cents on the day to close at $15.58. Itau Unibanco stock is currently up 37 cents to $15.95 today.
Bullish activity such as this does not mean investors should run out and buy Itau Unibanco shares. But it is noteworthy that at least one investor could be bullish and boosted Itau Unibanco volume yesterday on a bet that Brazil's banks are poised for a quick rally before the expiration on June 19.
Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."