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October 11, 2012  Thu 3:45 AM CT

MBIA drew long-term put buying yesterday for the second time in less than a week.

More than 73,000 MBI options traded, compared to a daily average of 3,800. Puts outpaced calls by more than 10 to 1, led by 57,000 that traded in the January 2014 5 strike against open interest of 15,173 contracts.

These puts were bought throughout the morning for $0.57 up to $0.63, with the biggest block of 30,000 going for the bid price of $0.60, according to optionMONSTER's Depth Charge tracking system. Last Thursday a trader bought 14,000 puts at the same strike.

MBI fell 2.46 percent yesterday to close at $10.29. The company, which backstops municipal and asset-backed debt, started the week above $11 and was up at $12 in mid-September.

The put buying appears to be a straightforward bet that the stock will drop sharply to levels last seen at the end of 2009, when it traded as low as $3.19. It is not likely a hedge on a long position because the puts are more than 50 percent out of the money. (See our Education section)
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