Why Radian is seeing big call action

optionMONSTER

Radian saw heavy call activity as the mortgage insurance company climbed to an 18-month high yesterday.

optionMONSTER systems show that more than 38,000 RDN options traded on the day, compared to a daily average of 1,700 in the last month. Calls outpaced puts by 5 to 1, with a large call spread making up most of the action.

A trader sold 5,000 January 5 calls for $1.25 against previous open interest of 8,433 and sold 10,000 January 5.50 calls for $0.80 against open interest of more than 18,000. At the same time, he or she bought 15,000 January 6 calls for $0.50 in volume far above the open interest at that strike of just 1,666, so that is a new position.

It appears that the trader is rolling the 5.50 and 6 calls to the higher strike for continued upside exposure , given that all three strikes are in the money . (See our Education section)

RDN closed the session up 3.27 percent at $6.31 after reaching $6.52 earlier in the day, its highest levels since April 2011. Shares are up more than 200 percent from their 52-week low of $2 set back in May.

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