Brazilian Markets Beckon Option Bulls

Today’s tickers: EWZ, NOK, YUM, EXPE, CY & COF EWZ – The exchange-traded fund was boosted higher today as Brazilian stocks gained the most in nearly two months. EWZ has experienced a 5.5% rally in shares to $52.80. Option traders populating the fund were seen making bullish plays to take advantage of today’s upward momentum. The near-term July 53 strike price had approximately 9,200 calls purchased for an average premium of 53 cents per contract. Individuals positioned at the July 53 strike are hoping the price of the underlying stock rallies 73 cents higher to breach the breakeven point on the trade at $53.53. One option trader selected the August 52 strike price to initiate a bullish reversal. It appears that this individual shed 6,500 puts at that strike for 2.60 each in order to purchase 6,500 calls for an average premium of 3.10 per contract. The net cost of the reversal amounts to 50 cents and yields a breakeven share price of $52.50. Reducing the price of getting long the calls by selling put options has dramatically reduced the breakeven point to the upside. The investor has already started to profit on the rally as the current market value of the stock is approximately 30 cents higher than the breakeven point. – iShares MSCI Brazil Index Fund NOK – The world’s biggest maker of mobile phones has rallied higher by more than 6% to stand at $15.63 ahead of earnings scheduled for release tomorrow. The broad-based gains experienced by the market today have bolstered bullish traders who were seen picking up calls and selling puts on Nokia in the October contract. Put options at the out-of-the-money October 14 strike price were sold 2,700 times for 66 cents each while 3,200 puts were surrendered at the October 15 strike for an average premium of 1.05 apiece. Perhaps these investors do not feel the need for downside protection on the stock. The traders may retain the premiums received for writing the puts if shares of NOK remain higher than the strike prices described previously. They may also utilize the option premium to offset the cost of purchasing the shares in the case that shares slip and the puts land in-the-money. Just in-the-money puts were sold 2,400 times at the October 16 strike price for a premium of 1.58 per contract. Again, the full premium is retained if the puts remain out-of-the-money by expiration. Otherwise,…