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Time for a comeback in Ambac?

David Russell (david.russell@optionmonster.com)

One big investor is getting interested in Ambac Financial, a casualty of the 2008 crash that emerged from bankruptcy earlier this year.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 6,100 February 20 calls for $1.10. Volume is almost 8 times previous open interest at the strike, indicating that new positions were initiated.

These long calls lock in the price where investors can buy shares in the municipal-bond insurer, letting them cheaply position for a rally. The contracts can also generate significant leverage in the event of a rally. (See our Education section)

AMBC is down 4.13 percent to $16.03 in morning trading and has lost 30 percent in the last three months. The company entered Chapter 11 bankruptcy in November 2010 following losses caused by the subprime-mortgage crisis. It mostly traded between $20 and $26 this year before dipping under $20 in September.

The next earnings report is scheduled for Nov. 14, so today's contracts would profit from a strong set of numbers.

Total option volume is 21 times greater than average so far today, according to Heat Seeker. Calls outnumber puts by more than 400 to 1.

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