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January 15, 2013  Tue 9:48 AM CT

AGO: SEE CHART GET CHAIN FIND STRATEGIES
Assured Guaranty is down again today, but at least one trader is keeping the faith.

optionMONSTER systems show that a trader sold more than 2,000 January 15 calls, most for $0.15 against open interest of more than 18,000. At the same time, he or she bought corresponding blocks of the February 16 calls, with the largest prints going for $0.29. The volume was well above that strike's previous interest of just 337 contracts, clearly indicating a new position.

With just a few days left before the January options expire, this trade appears to be rolling that position forward and to a higher strike. The adjustment reduces the cost of the position and keeps the investor in the trade for another month. (See our Education section)

AGO is down 2.22 percent this morning to $14.55 after trading $0.30 lower earlier in the session. Shares of the financial-insurance company were up at $15.72 last week.
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Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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