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Upside play in Assured Guaranty

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Assured Guaranty is attracting bullish option activity ahead of its earnings report next week.

About 5,000 March 24 calls were bought in less than 3 minutes yesterday afternoon for $0.64 to $0.68, according to optionMONSTER's Heat Seeker tracking system. This is clearly new positioning, as open interest in the strike was just 257 contracts before the session began.

These long calls lock in the price where the stock can be purchased for the next month 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 will expire worthless if shares remain below $24. (See our Education section)

AGO slipped 0.48 percent yesterday to close at $23 even. The bond-insurance company fell for most of January but has recovered almost all of those losses this month. It is scheduled to release quarterly results on Wednesday after the close.

Total option volume in the named topped 9,000 yesterday, compared to a daily average of 6,884 for the last month. Overall calls outpaced puts by more than 4 to 1.

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