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Put sellers bet on floor in Gerdau

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Brazilian steel maker Gerdau is down about 25 percent this year, but traders are betting that any further losses will be limited for the rest of 2014.

About 3,000 January 5 puts were sold yesterday, mostly for the bid price of $0.20, according to optionMONSTER's tracking systems. The volume was well above the strike's previous open interest of 1,732 contracts, indicating that new positions were established.

This put selling is looking for GGB to stay above $5 through expiration early next year, at which time the $0.20 credit would be booked as profit. But if the stock falls below the strike price, traders would be on the hook to buy shares at that level. (See our Education section)

GGB rose 2.36 percent yesterday to close at $6.06, near the bottom of its recent range. The stock began the year near $8 but has been trading mostly between $6 and $6.50 for the last three months.

Yesterday's put sale pushed total option volume in GGB to 3,400 contracts, nearly 5 times its daily average for the last month.

Disclosure: I am long GGB.

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