Assured Guaranty Rallies After Downgrade

CHICAGO (TheStreet) -- Assured Guaranty(AGO Quote)shares have rallied 15% so far Friday following the company's reassuring statement in response to Moody's downgrade.

It looks like some investors could be re-positioning in this insurance name after the stock saw a new 52-week high this morning and is due to report earnings Monday, Nov. 16.

ONN.tv reported options action in the company two days ago when an investor bought a calendar call spread in anticipation of a moderate rise in the shares. The investor bought the January 20-April 20 call spread 10,000 times, expecting the stock to trade higher but stay below $20 up to January expiration.

Today, we are seeing the December 22.5 calls cross the tape more than 11,600 times versus current open interest of just 20 contracts. These calls are up about 90 cents and have a delta of approximately 40 now with the stock currently up $2.93 to $21.03.

The majority of this volume hit the tape in a single block. At 10:34 a.m. EST, 10,000 of these options traded for $1.40 as the stock came off its highest point during morning trading just above the strike price. As the stock fell back below $21 but remained up $2.80 on the day, investors bought these calls on the offer, up more than 500% from their closing price of around 20 cents on Thursday.

Normal daily options volume in AGO is approximately 1,400 contracts. More than 26,000 options across all strikes have changed hands in AGO, the bulk of which accumulated in the December 22.5 series.