MBIA has taken a beating, but one big investor remains a
optionMONSTER's monitoring programs detected the purchase of 5,000
November 13 calls for $0.32 and the sale of a matching number of
August 10 puts for $0.42. Volume was more than triple the previous
open interest in each strike, which indicates that new positions
The investor collected a credit of about $0.10 and now controls the
equivalent of 500,000 shares in the financial guarantor. He or she
will earn huge profits from a rally but will also be on the hook to
buy stock for $10 if it drops under that level. While such
combination trades are common, today's strategy is unusual because
it uses different expiration months. (See our
section for more on
MBI fell 2.44 percent to $10 yesterday and is down 22 percent in
the last month. The stock has been falling amid litigation against
Credit Suisse and as investors worry about its exposure to Puerto
Rican debt following a Moody's downgrade of the territory's credit
Yesterday's trader is placing a major bet that the company will
weather that storm and hold the $10 level. If it doesn't, he or she
will face potential losses of as much as $5 million.
There was also bearish put buying yesterday in related company
Assured Guaranty, with 10,000 January 21 contracts purchased for
Total option volume in MBI was more than triple its daily
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