AIG Options Volume Surges Once Again

Today’s tickers: AIG, CAT, UAUA, WFC, HIG, CHK, FRE & SLV AIG – Nearly 300,000 option contracts, which represent 59% of the existing open interest on the stock of 509,946 lots, exchanged hands on AIG today as investors await the release of the firm’s second-quarter earnings report tomorrow. Shares of the firm exploded nearly 63% higher yesterday to $22.00, and continued to rally during today’s session. The stock reached an intraday high of $29.39 within the first half hour of trading, but has since come off to the current price of $23.50. The put-to-call ratio of 1.04 indicates that put options were favored just slightly over call options. Trading volume was most heavily concentrated in the near-term August contract with the August 30 strike calls trading more than 31,000 times for a current premium of 1.93 apiece. Investor uncertainty has gone through the roof over the past two days, rising up from 99% at the open on Wednesday to an intraday high today of a whopping 196.5%. Volatility will likely implode following tomorrow’s earnings release. – American International Group, Inc. CAT – It seems that one investor has decided to stick with Caterpillar for the long haul by initiating the purchase of a chunk of married puts in the January 2011 contract today. Shares of CAT are currently trading higher by less than 0.5% to $46.81. The stock has enjoyed a glorious run-up over the past four weeks, surging 36% higher from a low of $30.03 on July 10, up to a nine-month high of $48.08 attained during yesterday’s trading session. Perhaps the investor is anxious to get in on the bullish action, but is fearful that the stock may encounter some rough patches while the global economy struggles to free itself from the clutches of the recession. Thus, he chose to buy the stock but simultaneously pick up downside protection, as well. The investor bought approximately 12,500 puts at the January 2011 45 strike price for an average premium of 9.68 per contract. A great deal of the premium described is composed of time value which will erode as we near expiration in 2011. But, the investor may now watch the stock appreciate over time and feel secure in the event that shares slip lower on occasion. – Caterpillar Inc. UAUA – The Chicago-based owner and operator of United Airlines appeared on our ‘most active by options volume’ market scanner this afternoon after one…