MBIA is potentially rolling over, and one investor is looking for a drop as earnings loom.
optionMONSTER's Depth Charge tracking system detected the purchase of 8,100 June 9 puts for $0.41 and the sale of an equal number of June 8 puts for $0.15. Volume was more than 20 times open interest in both strikes.
This bearish put spread cost $0.26 and will earn a maximum profit of 285 percent if the financial guarantor closes at or below $8 on expiration, a level not seen since July.
MBI fell 1.89 percent to $9.86 in morning trading. It rallied along with the rest of the market between last summer and January but has started making lower lows and lower highs since then. Some chart watchers may consider that a bearish pattern.
The bearish put spread occurs two sessions before the company's next earnings report, scheduled for Wednesday morning. The company, which is still reeling from the collapse of the mortgage market three years ago, had a surprise profit the last time it issued results on March 2 thanks to an unusual derivatives gain.
Overall option volume in MBI is more than twice the average amount so far today, with puts outnumbering calls by 15 to 1.
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