Bears circling MBIA for second day
The bears targeted MBIA yesterday for the second session in a row.
optionMONSTER's Depth Charge tracking program detected the purchase of about 2,900 January 2017 7 puts, most of which priced for $1.60. Volume was 15 times the previous open interest, which indicates that new positions were initiated. The action was especially noteworthy because the trader was using the longest-dated contracts, which expire in two years.
Puts lock in the price where a stock can be sold, so they gain value when shares fall. Investors use them to hedge long bets or to speculate on a drop. (See our Education section)
MBI fell 1.85 percent to $8.47 yesterday and is trying to hold the bottom of its long-term range. The loan guarantor has mostly reported strong earnings, but investors remain wary of potential exposure to bad mortgages.
Some 4,000 August 7 puts were also bought for about $0.60, but volume was below open interest. Overall turnover in the name was 5 times greater than average, with puts outnumbering calls by 34 to 1.
We alerted InsideOptions Pro subscribers to trades in the August 8 puts for about $0.76 in the previous session. Those same contracts fetched as much as $0.95 on yesterday.
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