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• AIG 53% Rate It

Shares of American International Group Inc. (NYSE: AIG ) dropped more than 2% during the first 30 minutes of trading on Tuesday without any notable news this morning on this insurance company. Options action out of the gate suggests an investor could have closed a bullish call position on a bet that the stock will be hard-pressed to rally during the near term.

More than 7,500 September 40 calls have crossed the tape versus current open interest of 8,200 contracts. We saw one block totaling 6,865 of these near-the-money calls changed hands at 9:53 a.m. EDT for $2.67 per contract. This price was closer to the bid at the time of the trade. Judging from the open interest level, this investor most likely sold to close a long call position for a slight profit or loss, depending on the original premium.

The initial long call position most likely bet that AIG shares will be trading higher than $40 at September options expiration. The investor appears to be convinced that the stock will not experience as much upside as originally anticipated, and could have closed the bullish position to avoid further losses.

On Aug. 6, AIG announced earnings of $1.99 per share, and beat estimates by $1. Since the earnings announcement, the stock has been on the rise, but took a turn this morning. The stock dropped roughly 98 cents to $40.66 as of 10:07 a.m. EDT, and is trading 9% lower than its six-month high of $45.

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