Options Trading News

May 8, 2013  Wed 9:53 AM CT

MGIC Investment is near multi-year highs, and traders apparently believe that mortgage insurer will hold its gains.

More than 5,000 of the January 2015 puts have traded in volume that dwarfs the previous open interest of just 150 contracts, clearly showing that this is new positioning. The big block of 4,497 was sold for $0.77 on a relatively wide bid/ask spread.

The put selling is a long-term bet that MTG will hold above $5. This type of trade is a favorite strategy among some notable traders, including Warren Buffett. (See our Education section)

MTG is up 0.9 percent to $5.75 this morning. That would be the stock's highest close since July 2011, if that level holds through the rest of the session. Shares were below $5 last week and under $3 in late February.

More than 9,000 MTG options have changed hands less than 90 minutes into the session, already matching its full-day average.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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