Jumping Aboard The AIG Put Train
Andrew Wilkinson, Interactive Brokers, 07.09.09, 12:45 PM EDT
If the equity is worthless, puts are a good bet. But how much do analysts really know?
American International Group, Inc. ( AIG - news - people ):Investor uncertainty over the fate of the insurance company surged this morning following extremely bearish reports from analysts at Citigroup ( C - news - people ). One analyst at Citi reported "a 70% chance that the equity at AIG is zero," sending shares of the insurer lower by more than 21%, to $10.31. Option traders looking to reel in profits on the rapid erosion in price Thursday were seen gobbling up bearish put options in the near-term July contract. Investors expecting continued declines targeted the nearly at-the-money July 10 strike price and bought more than 4,800 puts for an average premium of $1.05 each.
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