Why Are Options Targeting MBIA?
By: Financial insurance firm MBIA has dropped some 14 percent in the last week, and options traders are positioning for more downside in the next two months.
Monday's MBI options activity has focused on the August 5 contracts, where buyers came out in the first 15 minutes of trading this morning to buy puts for $0.60 in a single sweep across multiple exchanges, OptionMonster's tracking systems show.
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By this afternoon, 4,455 puts had changed hands in a strong buying pattern at that strike, well above open interest and dwarfing the average put volume of just 85 contracts.
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Options Trading School:
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The shares, which are down 3.18 percent on the day to $6.08 in afternoon trading, would need to fall another at least another 27 percent by August expiration for the trades to profit. The stock has doubled and then some from its March lows, but MBIA still faces some negative issues and a short interest that is near 17 percent.
More on Treasurys/Bonds and Equities:
- Art Cashin: 'Any Idiot' Can Play Yield Curve (For Now)
- 'Fast Money' Traders: Playing the Uncertainty
- Pros Say: Bull Market Back by August
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Other Financial Insurers:
Ambac Financial Group
MGIC Investment
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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC's "Fast Money" and co-founder of OptionMonster.com.
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