MBIA Inc. (NYSE: MBI) shares are trading higher on the day in a continued recovery from its recent lows as some investors are beginning to find themselves bullish on the bond insurer. This sentiment is apparent in the price of the July $5 options, which are trading at a high $0.75 per contract. The price implies that some investors are betting that MBIA will rise above $5.75 during the next 23 days before the July options expiration.

Investors who are neutral to bullish may be interested in purchasing a covered call on MBIA to take advantage of this premium. The return on investment for this position would be approximately 15.31% for a 23-day period assuming that the stock doesn't plummet below $4.90 during that time.

Shares of MBIA have plummeted in recent weeks after an analyst from UBS noted that the company could face an additional $6.8 billion to $7.5 billion in losses on its mortgage-backed securities and structured finance portfolio. Brian Meredith noted that these calculations were based on UBS' mortgage research team's cumulative mortgage-securities and credit loss expectations.

Recently, MBIA's credit rating was cut to "AA" from "AAA", which means that the insurer may face difficulty generating new business. After all, who is going to insure their bonds with someone who has a less than perfect credit rating.

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