Title companies are engaged in the ethereal business of real estate contracting. A basic description of their function is they insure a homeowner is the rightful owner of a property. This seems like a relatively unnecessary administrative function, but without these companies real estate ownership and transactions would likely be more chaotic and risky.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_09_11_Title.mp3
| Signup now for PowerOptions free 14-day trial |
The recent decline in the housing market and increase in title claims and foreclosures has put a strain on the companies in the industry. Also, title companies are seeing a drop in new business. This is not too much of a surprise because as the purchase of property declines, so does the need for a title company’s service.
| Signup now for PowerOptionsApplied 30-day risk free trial |
Claims on a title are generally rare, but if adequate research was not done when the title was issued a claim may result. Experts suspect the recent rise in claims may be due to the monstrous number of titles issued during the housing boom. Because titles were issued so quickly, it may have increased mistakes and shoddy title searches.
Bear Market Outlook on Title companies:
Using the PowerOptions search tools, an investor can easily identify viable trades in the Surety and Title Insurance sector. Two common types of option trades to use in this situation are the bear put debit spreads and the bear call credit spreads. As the name suggests, there is a net debit with the bear put debit spreads and a net credit when entering the bear call credit spreads. Both involve selling and purchasing options at different strike prices.
For more information on these types of trades, visit the information section of the PowerOptions website at www.poweropt.com/ strategymenu.asp. Or simply click on the following links to the articles on the trading strategies described in this blog post: Bear-Call Credit Spreads and Bear Put Debit Spreads.
Potential Trades:
All of the following trades were found using the PowerOptions search tools. This search was comprised of screening for stocks in the Surety and Title Insurance sector for the month of October. It took less than five minutes to configure the search and gather these results.
All of the following trades have 39 days until expiration.
| Bear Put Debit Spread – Surety and Title Insurance sector | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Symbol | Stock Price |
Sell Opt |
Strike Info |
Option Bid |
Buy Opt |
Strike Info |
Option Ask |
% If Asgnd |
Net Debit |
Break Even |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PMI | 29.60 (-0.19) | PMIVF | 07 OCT 30.0 (39) | 2.15 | PMIVG | 07 OCT 35.0 (39) | 5.9 | 33.3 | -3.75 | 31.25 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MTG | 28.05 (+0.53) | MTGVF | 07 OCT 30.0 (39) | 3.5 | MTGVG | 07 OCT 35.0 (39) | 7.4 | 28.2 | -3.9 | 31.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bear Call Credit Spread – Surety and Title Insurance sector | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Symbol | Stock Price |
Sell Opt |
Strike Info |
Option Bid |
Buy Opt |
Strike Info |
Option Ask |
% If Asgnd |
Net Debit |
Break Even |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| MBI | 58.18 (+0.75) | MBIJM | 07 OCT 65.0 (39) | $1.35 | MBIJN | 07 OCT 70.0 (39) | 0.65 | 16.3 | 0.7 | 65.7 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ABK | 60.93 (+0.82) | ABKJN | 07 OCT 70.0 (39) | $0.95 | ABKJP | 07 OCT 80.0 (39) | 0.1 | 9.3 | 0.85 | 70.85 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The PMI international bear put spread trade has a potential profit of 33.3% if the stock stays below the lower strike price of $30. The breakeven point on the trade is $31.2; this is the price above which the investor begins losing money on the trade.Another interesting trade is the MBI trade. This trade offers 16.3% potential profit if the stock remains below the $65 strike price. The stock is currently trading at $58.18. This trade also doesn’t begin to lose money until the stock rises above $65.70. A rise of that magnitude would constitute a nearly 13% rise in the stock price.
Competitors:
Competitors for PMI include: MGIC Investment Corp. (MTG), Radian Group Inc. (RDN), Genworth Mortgage Insurance Corporation (private), and Old Republic International Corp. (ORI).
Competitors for MTG include: PMI Group Inc. (PMI), Genworth Mortgage Insurance Corporation (private), United Guaranty Corporation (private), Radian Group Inc. (RDN), and Triad Guaranty Inc. (TGIC).
Competitors for MBI include: Ambac Financial Group, Inc. (ABK), Financial Security Assurance Holdings Ltd. (FSE), Financial Guaranty Insurance Company (private), and Assured Guaranty Ltd. (AGO).
Competitors for ABK include: Financial Security Assurance Holdings Ltd. (FSE), MBIA Inc. (MBI), Financial Guaranty Insurance Company (private), and Assured Guaranty Ltd. (AGO).
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
[tags] Genworth Mortgage Insurance Corporation, United Guaranty Corporation, Financial Guaranty Insurance Company, ABK, AMBAC Inc., AGO, Assured Guaranty Ltd., MBI, MBIA Inc., MTG, MGIC Investments Corp., ORI, Old Republic International Corp., PMI, Premark International Inc., RDN, Radian Group Inc., TGIC, Triad Guaranty Inc., bear call credit spreads, bear put debit spreads, bear-call credit spreads, poweroptions [/tags]