How the mighty are still falling

Tags: AIG, bear-call credit spreads, put options

Insurance giant American International (AIG) recently broke $32.50 major support and dropped another 3% to below $30 today on heavier than normal volume. Although the stock is down over 50% since its January high of $63, it still has a ways to go before it reaches its all-time recession low of $6.60 set in 2009. (FYI, the stock’s all-time was back in 2000 when it hit $2075!)

A glance at today’s options action on AIG shows big volume at the May and June 29, 30, and 31 put strikes. These puts may be financed by bear call credit spreads. Evidence that this well might be the case is by the increased call option activity seen in the May 30 through 33 strikes. The May 33 call is trading near the ask while the lower strikes are trading near the bids suggesting bear-call debit spread positions.

The weekly chart of AIG shows lower support levels around $27.50 and $22.50, something to keep in mind if you’re interested in establishing a bearish position.

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