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What's behind Bradesco put selling

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Banco Bradesco has fallen sharply in recent weeks, but one trade apparently believes that the Brazilian lender will hold its current level in the long term.

optionMONSTER's tracking systems detected the sale of 1,800 January 2015 15 puts for $2.54 on Friday. This is clearly a new position, as the strike's open interest was 632 contracts before the trade appeared.

BBD fell 1.05 percent to $15.03 on Friday. Shares had been trading sideways all year but gapped lower along with other Brazilian banks when the country reported weak economic numbers on May 29. Bradesco is scheduled to report second-quarter results on July 22.

If BBD is above the $15 strike price at expiration in early 2015, the put seller will keep the $2.54 credit as profit. If the stock is below that level, the trader will face the obligation to buy the shares at an effective price of $12.46. The latter might actually be the intended strategy, as traders sometimes sell at-the-money puts in hopes of buying stock at a discount . (See our Education section)

Total option volume in BBD was 5 times its daily average on Friday.

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