MGIC Investment has been weak, and one investor is worried about a collapse.
optionMONSTER's Depth Charge monitoring program detected the purchase of 3,090 August 3 puts for $0.65 and the sale of an equal number of August 1.50 puts for $0.06. There was no open interest at either strike before the trade occurred.
The trade cost $0.59 and will earn a maximum profit of 154 percent if the mortgage-insurance stock closes at or below $1.50 on expiration. It could be the work an investor who wants to protect a long position in the stock or of a speculative bear wagering on new lows. (See our Education section for more the strategy, which is known as a put spread because it leverages a move between two prices.)
MTG is up 1.99 percent to $2.56 today. The shares more than doubled between October April but have since surrendered most of those gains.
Overall option volume is almost 5 times greater than average so far in the session, with puts outnumbering calls by 17 to 1.
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MTG
MGIC gets a vote of confidence
May 8, 2013
Shares of the mortgage insurer are near multi-year highs, and traders apparently believe that the stock will hold its gains.
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