Traders Place Bets Ahead of Brazil Elections (PBR) (VALE)

Petrobras (NYSE: PBR), Vale S.A. (NYSE: VALE) and other Brazil stocks are on watch ahead of elections Sunday. Incumbent Dilma Rousseff and rival Aécio Neves are practically neck and neck, with conflicting poll data from Sensus and Datafolha/Ibope. Some reports say Rousseff has a slight edge.

Earlier this week, hedge fund manager Jim Chanos described Petrobras as a scheme and called both stocks two of his favorite shorts. Since then shares have been pressured, but pared loses Friday.

If business friendly Neves wins, traders expect Brazil stocks to surge, at least for a day -- regardless of which horse Chanos is betting on.

One way or the other, options traders expect Petrobras sparks to fly Monday. Traders will also be watching iShares MSCI Brazil ETF (NYSE: EWZ).

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