By Pete Najarian, co-founder of OptionMonster
NEW YORK -- Investors are positioning for a rally in Assured Guaranty (AGO), which trades for barely half its book value.
OptionMonster's tracking systems detected the purchase of about 8,000 December 14 calls for 87 cents and the sale of an equal number of December 17 calls for 22 cents. Volume was more than triple open interest at both strikes, which means that new positions were initiated.
Those investors now have the right to buy AGO for $14 and have agreed to sell it for $17 if it closes above that level six weeks from now. They paid 65 cents to control this call spread and will collect $3 if it goes to $17--a profit of about 362% from a 30% move in the stock, which shows the kind of leverage you get from trading options.Assured Guaranty's shares fell 2.03% to $13.01 Tuesday. The company provides credit-protection products to financial markets in the United States, Europe, and Australia. Almost 20,000 contracts traded in the name Tuesday, compared with 4,700 in a normal session. Calls outnumbered puts by 6 to 1, reflecting the bullish sentiment. Najarian has no positions in AGO.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV