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Sharp move seen for American Capital

Chris McKhann (chris.mckhann@optionmonster.com)

A huge trade is looking for higher volatility in American Capital Agency as shares of the real-estate investment trust fall again today.

optionMONSTER systems detected the purchase of 20,000 May 32 puts for $0.66, above the listed bid price at the time. This is clearly fresh buying, as the open interest in the strike was fewer than 7,000 contracts before the session began.

Less than a minute later, the largest block of AGNC stock traded (by a factor of 10) as 920,000 shares were bought for $32.10. This combination of puts and stock creates an overall position that is a delta-neutral and long volatility , which means that the trader is looking for a big move up or down in the stock and/or for the actual volatility to be higher than that implied by the puts. (See our Education section)

AGNC is down 1.48 percent this morning to $31.86. It was up against resistance at $33 a week ago and has been trading between that level and $31.50 since January.

More than 32,000 AGNC options have changed hands already today, more than 6 times its daily average in the last month. 

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