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Why trader is selling puts in MGIC

Chris McKhann (chris.mckhann@optionmonster.com)

A long-term trade sees continued low volatility in MGIC Investment.

optionMONSTER systems show that a trader sold 5,000 January 2015 4.50 puts for $0.52, below the listed bid price at the time. The volume was more than 10 times the previous open interest, so this is a new position.

The put seller is betting that MTG will remain above $4.50 for the next 15 months. The trader is also taking on the risk of having to buy shares if they are below that level. (See our Education section)

MTG is up 1.92 percent to $7.42 this morning. The mortgage-insurance firm has been trading between $7 and $8 since reporting earnings in July. The stock was last below $4.50 when it gapped up from below $3 to $5 in early March. 

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