Time for a comeback in Ambac?

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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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: AMBC

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