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Bull likes Assured Guaranty at lows

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Assured Guaranty is trading at multi-month lows, but one investor is looking for a bounce.

optionMONSTER's Heat Seeker system shows that 2,000 October 21 calls were purchased for $0.65 yesterday morning. The volume was almost double the strike's open interest of 1,090 contracts before the trade appeared, indicating that it is fresh buying.

These long calls lock in a $21 purchase price for the stock through mid-October no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts could also expire worthless if shares remain below that level for the next eight weeks. (See our Education section)

AGO slipped 0.35 percent to $19.97, approaching its 200-day moving average as it closed below $20 for the first time in four months. The bond-insurance company hit $24.73 on May 15, its highest price since April 2010.

Total volume in the name yesterday was 44 percent higher than its daily average for the last month. Overall calls outnumbered puts by a bullish 20-to-1 ratio.

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