The put and call options involving Petrobras shares (PETR3;PETR4) have strong movements this Friday (8), with some puts rising more than 1,000%. This comes after the release of the results for the fourth quarter of 2024 and the announcement that the company will not distribute extraordinary dividends.
The company’s common and preferred shares have fallen sharply on B3 – both falling more than 9.5% – and financial instruments follow the trends. PNs are traded at R$36.90 and ONs at R$37.66.
The option is a derivative traded on the Stock Exchange. And like any derivative, its price “derives” from the fluctuation of the asset to which it is backed. In the case of a share option, the contract varies according to the fluctuations of this share on B3. Whoever buys an option is acquiring the “right” to buy or sell a share at a certain price. Whoever sells the option is selling the obligation to meet the requirement.
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According to data from Quantzed, some PETR4 put options rose by more than 1,000%, such as PETRO362, a put option, with an exercise price of R$36.26 and expiry on March 15th. This option closed yesterday at R$0.11 and reached R$1.70 today (or a jump of 1,445%).
In situations where there is a sharp drop in share prices, put options tend to appreciate in value. This happens because the profit potential when exercising the option (selling the shares at a higher price than the current market) increases.
“In my view, the movement occurs after the release of the balance sheet for the 4th quarter of 2023, with a number below the market consensus, but mainly, due to the decision to reduce the distribution of dividends and change the company’s capital allocation”, says Leandro Petrokas , director of research at Quantzed.
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“By choosing to reduce the distribution of dividends to allocate to other projects, the market remembers wrong decisions from the past, such as the Pasadena refinery”, he adds.
On the call options side, PETRC296, with a strike at R$29.72 and expiry on November 14th, falls more than 85%.
Understand in 4 steps how the options market works:
1) What is an option?
The option is a derivative traded on the Stock Exchange. And like any derivative, its price “derives” from the fluctuation of the asset to which it is backed. In the case of a share option, the contract varies according to the fluctuations of this share on Bovespa – check out InfoMoney’s share option quote tool.
Whoever buys an option is acquiring the “right” to buy or sell some share; whoever sells the option has the obligation to meet the requirements of the person who bought the contract. In other words: if you sold a call option and that option is exercised, you will have to sell that share to the option holder at the established price; If you sold a put option and it is exercised, you will have to buy this stock at the established price.
2) What is a call option? And a put option?
There are two types of options: purchase (call) and sale (put). When an investor buys a “call”, he is acquiring the right to buy a specific share at an already established price (which is the exercise price, or “strike”) until an already established expiration date. For the investor who buys a “put”, he is acquiring the right to sell a share up to a determined day at an already established value.
3) What do the letters and numbers of an option mean?
For both a “call” and a “put”, all information about the asset, the exercise price and the expiration date are already explicit in the contract. To the first 4 letters they name which action is the target of the option; The 5th letter defines whether it is a call or put option and its expiration date; The numbers define the price established to exercise this right.
Taking for example “PETRO208”, mentioned above:
– PETR: the option refers to Petrobras’ share
– O: is a call option expiring in March
– 208: defines the option’s exercise price (note: the explicit number in the contract is not always the exact “strike” of an option).