By David Russell
Ambac Financial (ABK) shares are slipping back under the 200-day moving average, and the bears are pushing for the next leg down.
optionMONSTER's Depth Charge monitoring system detected the purchase of 3,010 February 1.50 puts for $0.65 to $0.80 against open interest of only 38 contracts. The trades came amid a bearish order flow, with puts accounting for 92 percent of the options activity in the financial guarantor today.
ABK fell 11 percent to $1.04 in morning trading and is down 30 percent in the last month. On Nov. 4 the company reported a profit that resulted from market gains in some credit instruments. Monday afternoon rival MBIA reported a steep loss, and news reports have been circulating that ABK may be forced into Chapter 11 bankruptcy.
Tuesday's put buyers in ABK chose in-the-money strikes, which gives them a stronger correlation to movements in the underlying shares and reduces the amount of money they'll lose if the stock doesn't drop as expected.
Depth Charge also detected buying of the November 2.50 puts for $1.45, although volume was below open interest.
Overall options volume in ABK is more than twice the average level today.
(Chart courtesy of tradeMONSTER)