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Options Bullish on This Mortgage Insurer

Thursday, 1 Jul 2010 | 10:53 AM ET

Assured Guaranty spent most of June churning below $15, but activity turned bullish yesterday (Wednesday) amid speculation of a legal settlement.

The mortgage insurer fought hard against a downdraft in the market yesterday, and buyers stepped in to the August 14 calls. They initially snapped up blocks for $1.45 to $1.50.

The stock drifted down along with the rest of the market late in the day, but the call activity showed up again on OptionMonster's Heat Seeker system, this time for $1.35. By the end of the session, volume in the August 14 calls stood at 8,156 — more than 2.5 times the average daily call volume at all strikes combined.

The stock ended Wednesday up 0.15 percent to $13.27.

The bullishness is nothing new for Assured Guaranty, which has seen about twice as many calls than puts trade on average over the last month. Yesterday the catalyst was a note from Piper Jaffray saying that the company will reach a settlement in a dispute with Deutsche Bank.

Financials have certainly been a killing zone of late, so we're not feeling any need to rush in. But it's on our watch list.

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Options Trading School:

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Disclosures:

Najarian does not hold significant shares in the company mentioned in this story.

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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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