Obama's Proposed Change Has Radian Group Inc. (RDN) Bears Piling On

Radian Group Inc (RDN) puts are crossing the tape at 30 times the average intraday rate

by Karee Venema

Published on Jan 7, 2015 at 3:11 PM
Updated on Apr 20, 2015 at 5:09 PM

Radian Group Inc (NYSE:RDN) has shed 4.5% to trade at $15.78, as news of President Barack Obama's proposal to cut Federal Housing Administration (FHA) mortgage-insurance premiums overshadows a price-target hike to $16.50 from $16 -- and reiterated "neutral" rating -- at Credit Suisse. Against this backdrop, RDN puts are crossing the tape at 30 times the average intraday pace.

Most active is the equity's January 2015 16-strike put, which is being bought to open for a volume-weighted average price (VWAP) of $0.45, making at-expiration breakeven $15.55 (strike less VWAP). Profit for the put buyers will accumulate south of here, while losses are capped at the initial premium paid, should RDN settle north of the strike at next Friday's close, when front-month options expire.

Widening the sentiment scope reveals today's accelerated put activity runs counter to the withstanding trend. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 38.45 ranks in the bullishly skewed 85th annual percentile. With nearly 29% of Radian Group Inc's (NYSE:RDN) float sold short, though, a portion of this recent call buying may have been a result of short sellers hedging their bearish bets.

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