MGIC Investment Corp. (NYSE:MTG) – Mortgage insurer, MGIC Investment Corp., was among the most active names by options volume this morning after one strategist initiated a sizable bull call spread in the January 2013 expiry options. Shares in MTG ticked higher earlier in the session, but currently trade flat on the day at $2.02 as of 11:45 a.m. ET, ahead of the company’s third-quarter earnings report due out after the closing bell. It looks like one trader purchased roughly 10,000 calls at the Jan. 2013 $2.5 strike for a premium of $0.38 apiece, and sold around the same number of calls at the higher Jan. 2013 $3.0 strike at a premium of $0.21 apiece. Net premium paid to establish the spread amount to $0.17 per contract and prepares the trader to profit in the event that MTG shares rally 32% to top the breakeven price of $2.67. Maximum potential profits of $0.33 per contract are available on the position should shares in the mortgage insurer gain nearly 50% to settle at $3.00 by January expiration. Shares in the name last traded above $3.00 back in July.
Gentex Corporation (NASDAQ:GNTX) – Options on the maker of fire detection products and automatic-dimming rearview mirrors are more active than usual this morning ahead of the company’s third-quarter earnings report ahead of the open tomorrow. Shares in Gentex Corp. are up 1.3% at $17.18 as of midday in New York, but front month put buyers appear to be positioning for the price of the underlying to reverse course in the near term. The Nov. $15 strike put attracted the heaviest volume this morning, with around 2,800 contracts in play versus open interest of 466 positions. It looks like most of the puts were purchased for an average premium of $0.30 apiece. Put buyers may profit at expiration next month in the event that Gentex’s shares drop 14% to breach the average breakeven point on the downside at $14.70. Shares in GNTX are off their lowest level of the year, up nearly 20% since the end of July; however, shares are still down more than 40% since the start of 2012.
Caitlin Duffy
Equity Options Analyst
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