Option Traders Playing a Merger of Brazil Banks By Rebecca Darst About this article: An article appearing on Bloomberg's newswire last Friday suggested that Brazilian banks could be in for a new spate of consolidation as the valuation spread between the country's largest banks and smallest banks continues to widen amid turbulence for the country's stocks. With that in mind, we were particularly interested to observe a long, front-month straddle play this morning in Banco Itau, a $13 billion-capitalized bank, which earlier this month announced a takeover of sector peer Unibanco. The strategy shows an expectation of more near-term share-price swings for the holding company, even with today's 7.6% gain for shares to $9.74. In this directionally neutral but volatility bullish strategy, the trader appears to have entered a fresh 5,000-lot position at the December $10 line, paying $3.25 (one-third of the current share price!) and looking for a break either above $13.25 or below $6.75 by December 19. Implied... Or, call us at 1-866-321-TSCM (8726) Monday-Friday, 8 a.m.-6 p.m. ET. Outside the U.S. and in Canada, call 1-212-321-5200. More Stories From RealMoney Durable Goods Up Move Down the Tech Food Chain Jobless Claims Still High Bulls' Tenacity Is the Big Question Mark Should You Buy It? Pharmaceutical Product Development Bad News Trumps All Support for Banks Holds, For Now Bummer, Yields Are on the Rise Money on the Line Makes a Big Difference Structured Products: Unsafe at Any Price MORE STORIES FROM REALMONEY

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