How Option Traders Are Playing Grupo Financiero Galicia Following Argentina Market Crash

Shares of Argentine bank Grupo Financiero Galicia S.A. GGAL have crashed 50% this week amid one of the worst equity market collapses in recent global history in Argentina. At least one large option trader took the opportunity to make a move on Grupo Financiero Galicia on Tuesday morning.

The Trades

On Tuesday, Benzinga Pro subscribers received two options alerts related to an unusually large Grupo Financiero Galicia option trades.

At 9:22 a.m. ET, a trader sold 1,000 Grupo Financiero Galicia put options with a $15 strike price expiring on Jan. 15, 2021. The contracts were sold at the bid price of $4.201 and represented a $420,100 bullish bet on Grupo Financiero Galicia.

At 10:25 a.m. ET, a trader sold 672 Grupo Financiero Galicia call options with a $17.50 strike expiring on Oct. 18. The contracts were sold at the bid price of $2.90 and represent a $194,880 bearish bet.

Together, the two trades represent an aggregate $225,230 bullish bet on the battered Argentinian stock.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small size of the Grupo Financiero Galicia option trades, they are unlikely to be institutional hedges.

Argentina Rebound?

The Argentina stock market plummeted 35% on Monday and the value of its currency dropped 25% relative to the U.S. dollar after President Mauricio Macri shocked the market by losing the first round of elections by a wider margin than anticipated. Macri has been pushing a pro-business, free-market approach to economic reform in Argentina that involves aggressive austerity measures. Argentina investors seem to be factoring in a greater risk of sovereign default in Monday’s winner Alberto Fernandez ultimately takes control in October.

The two trades on Tuesday are representative of the type of uncertainty facing the Argentina market in the months ahead. The larger trade by value was the put sale, suggesting the trader could believe that Monday’s sell-off was overdone and subsequent primary results will stabilize the market. However, given those puts don’t expire until early 2021, the trader may also have simply been cashing out of a trade in which he or she bet that the election would lead to a major sell-off at some point in the next 18 months.

Investors will be keeping an eye on additional large Grupo Financiero Galicia option trades as the election and its economic fallout play out in the days and weeks ahead.

The stock traded around $17.36 per share at time of publication.

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