Ambac Financial Group (ABK) was targeted by pessimistic options traders on Monday, according to data from the International Securities Exchange (ISE). During the course of the session, speculators on the ISE bought to open 1,973 puts on ABK, compared to just 726 calls that were purchased. In other words, traders on this exchange purchased 2.72 times more bearish bets than bullish on the bond insurer.

The day's most popular put was the August 1 strike, where 2,784 contracts traded. About 94% of these contracts changed hands at the ask price, revealing they were most likely purchased, and implied volatility on this strike jumped 76.4% by the close. Open interest on the August 1 put increased overnight by 2,261 contracts, confirming that new pessimistic positions were opened here on Monday.

Continue reading Option Bears Place Bets on Ambac Financial Group

Option Bears Place Bets on Ambac Financial Group originally appeared on BloggingStocks on Tue, 25 May 2010 11:40:00 EST. Please see our terms for use of feeds.

Thanks to a downgrade warning from Moody's, bond insurers Ambac Financial Group (NYSE: ABK) and MBIA Inc. (NYSE: MBI) are sitting out today's massive rally in financial stocks. Late Thursday, Moody's announced that it may downgrade the duo's ratings by more than one notch due to rising losses from subprime mortgage debt. So far today, the news has prompted a 7% drop in MBIA shares, and a slump of nearly 8% for Ambac.

In a statement, Moody's said, "Because both Ambac and MBIA are meaningfully exposed to the risk of U.S. subprime mortgages and other residential mortgage products, the revised assumptions are expected to have a significant impact on the firms' capital positions and multi-notch downgrades are possible." Specifically, the "A2" insurance financial strength rating of MBIA's insurance unit is under review, as is the "Aa3" insurance financial strength rating for Ambac.

Neither bond insurer seems particularly pleased by Moody's decision. Jay Brown, chairman and CEO of MBIA, said that the review reflects "inherent flaws" in the ratings company's logic, and added that his company has a capital cushion of more than $3 billion. Ambac's chairman and chief executive, Michael Callen, noted his "surprise and disappointment" at the news, and added that "Moody's ratings actions continue to cause confusion, uncertainty and the risk of material economic damange if their assumptions ultimately prove to be too onerous."

Despite today's plunge, MBI and ABK remain poised atop support from their respective 10-week moving averages. Both bond insurers have endured massive price plunges amid subprime-related fallout, but they've recently rebounded. Ambac now boasts a 60-day relative-strength reading of 381% versus the S&P 500 Index, while MBIA's is 312%.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Ambac Financial and MBIA Inc. plunge on Moody's downgrade warning originally appeared on BloggingStocks on Fri, 19 Sep 2008 12:58:00 EST. Please see our terms for use of feeds.

Continue reading Stocks to avoid: Motley Fool says stay away from WaMu, Ambac, Pulte

Stocks to avoid: Motley Fool says stay away from WaMu, Ambac, Pulte originally appeared on BloggingStocks on Mon, 05 May 2008 17:29:00 EST. Please see our terms for use of feeds.

Bloomberg News reports on rumors that Wilbur Ross, a private equity investor who's made billions investing in industries like steel when they were down on their luck, will take over Ambac Financial Group (NYSE: ABK). Ambac's market capitalization has fallen $8 billion in the past year, and Fitch Ratings last week stripped it of the AAA credit rating it depends on to guarantee $556 billion of debt.

Why does bond insurance matter? Bond insurers lend their AAA rating to $2.4 trillion of municipal and structured finance debt. Downgrades would throw into doubt rankings on the debt the companies guarantee, including thousands of schools and hospitals as well as collateralized debt obligations (CDOs) owned by banks. CDOs account for $133 billion in write-downs and credit losses since the beginning of 2007 at more than 20 of the world's largest banks and securities firms.

If Ross buys into Ambac, it could be a far more effective solution than the one being discussed a few days ago involving a $15 billion bailout from weakened banks that was being pushed by the New York Insurance Department. I've been hoping that hedge funds or private equity would step into the breech. And if Ross is serious, this could be great news for the market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Ambac.

Will Wilbur Ross rescue bond insurance? originally appeared on BloggingStocks on Fri, 25 Jan 2008 11:28:00 EST. Please see our terms for use of feeds.

The second-largest bond insurer said it would replace its chief executive Robert Genader with board member Michael Callen, who will become chairman and interim CEO. The company cited its dissatisfaction with Genader's management, which brought the first-ever loss for the company last quarter.

The bond insurer's concerns came after Fitch Ratings warned it would cut its rating on Ambac if it was unable to increase its capital by at least $1 billion to cover potential future losses. Higher delinquencies and defaults among mortgages over the past few months increased ratings agencies' concerns over a possible surge in bond insurance claims.

Continue reading Ambac (ABK) cuts dividend, replaces CEO

Ambac (ABK) cuts dividend, replaces CEO originally appeared on BloggingStocks on Wed, 16 Jan 2008 10:42:00 EST. Please see our terms for use of feeds.

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

"Ambac Financial Group (NYSE: ABK) is my top high-risk speculation for 2008," says Kelley Wright, editor of Investment QualityTrends. "The company is the second largest municipal bond insurer and a major player in other types of financial guarantees and investment management services.

"Ambac primarily insures newly issued bonds, which guarantees payment of principal and interest to the bond insured. Of more concern to Wall Street, however, is the Specialized Finance division, which has significant exposure to the structured, asset-backed and mortgage-backed finance markets in the US and abroad.

"ABK shares have fallen dramatically, down as much as 70% year to date. This decline is due to investor concerns that losses on credit derivatives tied to residential mortgages and related obligations will deplete ABK's capital base to the point where the company will have to raise additional (and most likely dilutive) capital to maintain its top-tier financial strength rating.

Continue reading Best Stocks for 2008: Home run or crash for Ambac (ABK)

Best Stocks for 2008: Home run or crash for Ambac (ABK) originally appeared on BloggingStocks on Wed, 19 Dec 2007 08:00:00 EST. Please see our terms for use of feeds.