PBR – A possible Monster Trade

When nobody likes it, maybe it is time to invest.

Sooner or Later COVID-19 will become something like the flu, a more serious threat undeniably. The money printing machines will not stop really soon, the USD will become weaker to support the new US government , the emerging markets & their currencies will be back in favor following the USD demise. Oil & oil companies are not in vogue right now to say the least , but the sector will not vanish and the oil companies which ‘ll stay solvent can give considerable profits to the brave investors, who ‘ll go against the trend.
One of the possible best plays in the sector which will be helped a lot by the above trends is Petrobras(PBR) now at 6.93 USD the Brazilian State oil company. Petrobras which has suffered a lot by the pandemic, the Brazilian economy weakness & the weak BRL holds a promise.
Our quantamental model shows a fair value of 13 USD for Petrobras and a probability of 72.3% to surpass 12 USD the next 6 months. That’s a greater than 70% profit in 6 months.

For the very brave traders / speculators who believe in the above story & our model, there is an even more potentially profitable but much riskier way to trade this with the use of options.
You can buy the PBR April2021 call with strike price of 9 USD at the price of 34 USD per contract (100 shares). The breakeven price is 9.34 and if it reaches 12 USD the potential profit is at least 266 USD per contract , which is a 782% return. Of course below 9.34 the loss is 100% and needless to say that investing with options is a dynamic process. It is recommended to close all directional positions some weeks before expiration due to fast time decay.