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March 15, 2013  Fri 9:38 AM CT

MTG: SEE CHART GET CHAIN FIND STRATEGIES
MGIC Investment spiked higher as March began, but one trader sees limited upside in the next three months.
 
More than 5,000 June 5.50 calls have traded in volume well above the previous open interest of 1,078, indicating new activity. The big print of 4,756 was sold for $0.46, according to optionMONSTER systems.

These calls could have been sold naked with an initial bearish bias, but they were more likely traded against long shares in a covered call strategy. (See our Education section)

MTG is up 0.81 percent to $4.99 this morning, within its range of the last week. The mortgage insurer ran up from $3 to $6 into the start of this month, rising sharply along with other names in the sector, as seen on our researchLAB analysis tool.
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Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

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