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February 5, 2013  Tue 2:14 AM CT

MTG: SEE CHART GET CHAIN FIND STRATEGIES
MGIC Investment has fought its way back from a near-death experience, and one trader apparently believes that its shares will rally hard by summer.

More than 1,500 June 3.50 calls traded in a strong buying pattern in less than 3 minutes yesterday for an average price of $0.35, according to optionMONSTER's Heat Seeker tracking system. The volume was above the strike's open interest at the beginning of the session, indicating that this is a new position.

MTG fell 3.83 percent yesterday to close at $2.76. Shares of the mortgage-insurance company bounced off support at $2.50 at the end of January, just above its 50-day moving average, but has been unable to break through resistance around the $3.30 level that goes back to last May.

The stock has been grinding its way higher since gapping to an all-time low of $0.66 after the company's second-quarter results in August. The company has not yet scheduled its next earnings report.

Yesterday long calls, which lock in the purchase price for the shares, are betting that MTG will soar roughly 40 percent by mid-June. The options could be sold earlier for a profit if they rise in value with any rally before then, but these contracts will expire worthless if the stock is below $3.50 at that time. Shares last traded above that level in April of last year. (See our Education section)

Overall calls in the name outnumbered puts by more than 4 to 1 yesterday, a reflection of the session's bullish sentiment.
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The Strike-Based Greeks

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