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Petroleo Brasileiro Petrobras SA (PBR) Bears Take Aim at 11-Year Lows

Petroleo Brasileiro Petrobras SA (ADR) (PBR) hit $4.92 earlier, its lowest mark since August 2003

Mar 13, 2015 at 11:14 AM
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Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) plunged to an 11-year low of $4.92 earlier -- and was last seen down 4.4% at $4.98 -- after CNBC's Jim Cramer expressed concern that a surging dollar is negatively impacting PBR's market capitalization. This skepticism is being witnessed in the options pits, as well, where puts are trading at two times the average intraday pace -- due largely to a massive block of 17,000 contracts that changed hands at the July 5 strike.

Meanwhile, PBR's April 5 put has also seen notable action, and it appears new positions are being purchased here for a volume-weighted average price (VWAP) of $0.46. Based on this average entry price, at-expiration breakeven for the put buyers is $4.54 (strike less VWAP), or territory not charted since May 2003.

Given PBR's withstanding technical troubles, put players have been active in the equity's options arena for some time now. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day put/call volume ratio of 1.09 ranks just 1 percentage point from an annual peak. Plus, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.03 rests higher than 97% of similar readings taken over the past year, meaning short-term speculators have rarely been as put-skewed as they are now.

As touched upon, PBR has had a terrible time on the charts -- amid an ongoing corruption scandal, as well as a steep sell-off in crude. In fact, since hitting an annual high of $20.94 in September, shares of Petroleo Brasileiro Petrobras SA (NYSE:PBR) have surrendered more than three-quarters of their value. Off the charts, it was recently announced three members of Brazil's ruling party will be investigated as part of the investigation on PBR, including the governor of Rio de Janeiro, Luiz Fernando Pezao.


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