15 de octubre de 2014 / 18:48 / hace 3 años

Petrobras options buyers grapple with uncertain Brazil election

SAO PAULO, Oct 15 (Reuters) - Uncertainty stemming from Brazil’s most competitive presidential election in 12 years is claiming another victim: the buyers of options on shares of state-controlled oil producer Petroleo Brasileiro SA.

The 30-day implied volatility on options of Petrobras, as the company is known, more than doubled in recent weeks as the Oct. 26 runoff between President Dilma Rousseff and opposition candidate Aecio Neves remains too close to call. As a result, premiums are trading as much as four times above normal levels.

A series of Petrobras options expire on the exchange on Monday, less than a week from the runoff. Investors may end up paying even more to roll them over as implied volatility, a gauge of the risk that big moves in a stock pose, rises further and the company’s shares continue to climb.

“What the volatility is pricing in is the uncertainty,” said Fernando Góes, an analyst with Clear Corretora, a Sao Paulo brokerage.

The situation underscores how investors use Petrobras as a harbinger for future policy moves when a new presidential term starts in January. In the last four years under Rousseff, the government strong-armed Petrobras into investing in low-yielding projects that have fanned debt and weighed on profitability.

Between the start of Rousseff’s term and April, when the election campaign started to get under way, Petrobras preferred shares shed almost 40 percent. Since then, they have rallied 46 percent as investor optimism mounted that a more market-friendly candidate could beat Rousseff and restore Petrobras’ focus on profitability.

The implied volatility on the most widely traded option contract on Petrobras’ shares expiring next week is currently at 84, with the others range from 83 to 131.

As the election neared, the indicator climbed sharply for Petrobras and Brazilian banking shares including Itaú Unibanco Holding SA and Banco do Brasil SA. Petrobras regularly has the most liquid stock options contracts on the Sao Paulo Stock Exchange.

In September, the indicator hit the highest readings in a year for the U.S.-traded shares of Petrobras and Itaú, according to options analytics firm Livevol Inc.

“Markets are betting that Petrobras could benefit from a Neves win, but no one can assert at this point who will claim victory with certainty. That is why volatility is up,” said Flávio Conde, head of research at brokerage Gradual Corretora.

The average value of negotiated options almost doubled to 8.8 billion reais ($3.6 billion) last month from 4.6 billion reais a year earlier, according to the São Paulo Stock Exchange.

Petrobras stock will likely continue to face price swings after the election, until a winner signals policy preferences for the company, according Eduardo Roche of Rio de Janeiro-based Canepa Asset Management.

Implied volatility for the most widely traded option expiring on Nov. 17 has a reading of 120, and ranges between 119 and 133 for the remaining 13 contracts.

$1 = 2.4506 Brazilian reais Editing by Guillermo Parra-Bernal and Cynthia Osterman

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