AIG has had a busy week in the news.
First the insurance company announced the sale of most of its International Lease Finance Corporation (ILFC) to the New China Trust Co. Then the government announced that it will sell its remaining stake in AIG. This sent shares up 3.3% on the week, and 5.7% yesterday.
The headlines also created a flurry of option activity on the stock, as traders attempted to predict its next move. One trader took a large bearish position by buying 8,673 January 34-strike puts for $0.78 each in the final minute of trading on Tuesday. This trade will profit if AIG is below 32.22, or 3% lower, at January expiration.
This bearish trade is probably a hedge on a long stock position, and is likely being used to protect the gains made in yesterday's trading session. The U.S. Treasury's sale will bring 234.1 million shares to market, which could put some pressure on the stock. AIG is also looking at about $1.3 billion in losses from Sandy, and is expected to report a non-operating loss of $4.4 billion in Q2 2013 as a result of selling ILFC. These headwinds could weigh on the stock in the near term, along with profit taking ahead of the "fiscal cliff."
However, over a longer time frame, AIG looks to be poised for significant appreciation.
(Read More: AIG 'Profits' an Insult to the Concept: James Saft)