MGIC Investment has fought its way back from a near-death experience, and one trader apparently believes that its shares will rally hard by summer.
More than 1,500 June 3.50 calls traded in a strong buying pattern in less than 3 minutes yesterday for an average price of $0.35, according to optionMONSTER's Heat Seeker tracking system. The volume was above the strike's open interest at the beginning of the session, indicating that this is a new position.
MTG fell 3.83 percent yesterday to close at $2.76. Shares of the mortgage-insurance company bounced off support at $2.50 at the end of January, just above its 50-day moving average, but has been unable to break through resistance around the $3.30 level that goes back to last May.
The stock has been grinding its way higher since gapping to an all-time low of $0.66 after the company's second-quarter results in August. The company has not yet scheduled its next earnings report.
Yesterday long calls , which lock in the purchase price for the shares, are betting that MTG will soar roughly 40 percent by mid-June. The options could be sold earlier for a profit if they rise in value with any rally before then, but these contracts will expire worthless if the stock is below $3.50 at that time. Shares last traded above that level in April of last year. (See our Education section)
Overall calls in the name outnumbered puts by more than 4 to 1 yesterday, a reflection of the session's bullish sentiment.
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