Buying calls locks in the purchase price for the stock, so they can generate some nice leverage in the event of a rally. However, they will expire worthless if the stock doesn’t move.
Petrobras shares fell more than 4 percent early in the session after reporting its first quarterly loss in 13 years. Management later assured investors that costs would ease, causing the shares to close with a 0.54 percent gain at $20.44.
The stock has lost more than one-quarter of its value in the last year amid concerns about the global economy and negativity toward Brazil. In the last two weeks, however, it’s been consolidating above its 50-day moving average, which could be leading some chart watchers to believe that it will now rebound.
While investors have been aggressively targeting energy names recently, most of those trades have focused on smaller U.S. companies. That makes the Petrobras activity especially noteworthy.
Overall option volume was quadruple the daily average yesterday, with calls outnumbering puts by 3 to 1.
—By CNBC Contributor David Russell
Additional News: Brazil’s Petrobras Posts Second-Quarter Losses
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David Russell is a reporter and writer for OptionMonster. Russell has no positions in PBR.