Credit: Shutterstock photoShares of insurance name Assured Guaranty Ltd. (NYSE: AGO ) are on the rise and outperforming the broad-market gains so far this morning following a positive analyst note, and at least one investor chose to load up on upside calls to bet that the shares could climb even higher during the near term.
By 9:53 a.m. EST, more than 5,100 near-the-money August 14 calls had changed hands versus current open interest of just 581 contracts. A look at time and sales shows the volume traded in two large blocks (a block of roughly 3,600 contracts and a block of 1,000 contracts) and indicates the investors most likely initiated the action to open. The first block changed hands for $1.40 per contract and the most recent block traded for $1.50 per contract, suggesting buying action most likely pushed up the price of the options. These prices were also at the ask price at the time of the trades. Investors who bought these calls will make money if AGO shares are trading higher than $15.50 at August options expiration, and could theoretically make unlimited profits as the stock continues to move higher. On the other hand, if the stock remains below the strike price, the investor limits maximum loss to the premium paid, or roughly $1.50 per contract. If AGO shares are trading between the strike price and the breakeven price, the investor takes back some of the premium paid per contract.
Piper Jaffray this morning released positive notes on AGO related to the settlement between the company and Deutsche bank, according to published reports. AGO shares have since climbed 47 cents, or more than 3%, to $13.72.
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DOLE shares are relatively unchanged at $10.60 so far on the day. The stock reached a 52-week high of roughly $12.50 in March, and options action on the tape suggests at least one investor expects the stock to head closer to the recent highs prior to January 2011 options expiration.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
