Traders doubt there's magic in MGIC

By David Russell,

Shutterstock photo

MGIC Investment has leapt today, but one trader doubts the move.

optionMONSTER's monitoring programs detected the sale of about 40,000 December 3 calls against open interest of just 6,329 contracts. Premiums fell as the trades crossed, which reflects strong selling pressure, and the largest block priced for $0.20.

MTG is up 8.53 percent to $2.80 in morning trading but is off its highs for the session. The financial guarantor has continued to struggle in the wake of the mortgage meltdown but recently attracted some bullish interest after famed hedge-fund manager Kyle Bass disclosed he had taken a small position in the name. Bass had profited from the 2008 collapse and now believes that the worst of the crisis has worked its way through the system.

Nonetheless, MTG is facing resistance at its 100-day moving average, which could lead some chart watchers to believe that it's not ready for a sustained rally yet. Investors often sell calls in response to such a situation. (See our Education section)

Overall option volume in the name is more than 10 times greater than average so far today.

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

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

This article appears in: Investing Options
Referenced Stocks: MTG

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