Big banks such as Goldman Sachs and JP Morgan are struggling, and now capital is shifting to financial guarantors such as MBIA, Radian, and Ambac Financial.
OptionMonster's tracking systemsdetected a flurry of bullish activity in those companies and others yesterday even as the broader financial sector struggled.
MBIA was the busiest of the group, with option volume surging to 15 times greater than average. Investors snapped up the November 11 calls and the November 12s, paying $0.99 to $2.13 and $0.52 to $1.77, respectively, for large blocks.
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Ambac , which normally trades about 6,000 contracts, saw volume of 76,817 and heavy activity in the January 1.50 and October 1 calls before closing the day up 19 percent to $0.95. It was the biggest winner in the group, though it has been trading for under $1 for most of the last year as investors doubted its ability to survive as a going concern.
Radian climbed 6.83 percent to $8.91 and saw volume of more than 22,000 contracts, dominated by call buying. A similar pattern also appeared in Assured Guaranty and PMI.
By contrast, the Financial Select Sector SPDR exchange-traded fund, which tracks the broader financial sector, fell 1.78 percent to $14.60. Large banks and brokerages have been leading the sector to the downside, following a pattern of weakness that has been in place for months as the economy deleverages and underwriting fees get squeezed.
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David Russell is a reporter and writer for OptionMonster.