A Huge Weekly Bet Calling for Downside in Petróleo Brasileiro S.A. (PBR)

Petróleo Brasileiro S.A. – Petrobras (PBR) is a Brazilian oil and gas corporation that operates primarily in the production and refinery of petroleum oil. As of the time of this post (1:20PM CST), PBR is currently trading at 6.08, down 10.06% on the day. The stock is currently pressing its 52 week lows after pulling back steadily through the 20.00 support level that broke convincingly in early September. The company has been battling a series of controversies over the last several years, beginning with corruption allegations in 2009. More recently, PBR has been identified by auditors as maintaining insufficient accounting standards, and as a result the company has postponed its Q3 earnings release indefinitely.

If the company does not report earnings this month they will be in technical default as they will have violated one of their bond covenants. The stock has been very weak and today we saw some large orders hitting the tape that imply near term downside in PBR. Earlier today a trader bought 10,050 of the PBR Jan 9th Weekly 6 Puts for $0.19. With only a few day until expiration this is an extremely large order. With a well defined risk to reward setup I like this trade for a short setup. I bought a small position in these puts for $0.20 and will take targets every $0.10 higher.

Trade: I bought the PBR Jan 9th Weekly 6 Puts For $0.20
Risk: $20 per 1 lot
Breakeven: $5.80