Large Call Spread Purchased on MGIC

Shares of MGIC Investment Corporation (MTG) are flat on the session, trading at $2.02. The stock has been ticking higher ever since a large down gap in August. With a short-term bullish flag pattern formed last week, the stock looks ready to complete the gap fill up to $2.45.

One trader agrees and is buying a large call spread today. A short while ago the January 2013 $2.50/3.00 call spread was purchased 7,801 times, for $0.17. The $2.50 strike was purchased at 133% vol, while the $3.00 call was sold for 117%.

Given the respective open interest on the strikes, 6,210 and 2,055 contracts, this is clearly new, bullish positioning.

The trade has pushed overall call volume to 8x normal volume with over 21,000 calls traded on the session so far.

30-day implied volatility is up 1.6% today to 143.31%, while 10-day historical vol remains at 108.63%.

MGIC Investment Corporation is a holding company and through wholly owned subsidiaries is a private mortgage insurer in the United States. 

About Michael Zerinskas

Originally from Chicago, Michael J. Zerinskas began his career as an intern for a small high-frequency trading firm based at the CME; he then moved on to become Chief Options Strategist at Benzinga.com. Michael is now Unusual Activity Editor at The Options Insider, specializing in VIX, volatility, and flagging unusual activity.