Bull call spread in American International Group (NYSE: AIG)

Longer-term American International Group Inc. (NYSE: AIG) calls received a boost this morning thanks to an investor who appears to be moderately bullish on the insurance giant.

At 10 a.m. EST, a block of 5,000 January 2011 50-75 call spreads hit the tape. The options action suggests an investor bought the January 50 calls for around $3.70 per contract and simultaneously sold the January 75 calls for $1.30 per contract to pay a net debit of $2.40 per spread. Current open interest of the lower-strike calls is 1,900 contracts, while the January 75-strike calls are home to current open interest of 5,200 contracts.

The investor who likely bought this call spread will make a maximum profit of $22.60 per spread (the difference between the strikes minus the premium paid) if AIG shares close higher than $75 at January 2011 options expiration. The investor makes money on this trade until AIG shares drop below $52.40 (the breakeven price), but protects against significant losses if the stock drops below this level. Maximum risk on this bull call spread is the debit paid, or $2.40 per spread.

To visualize the risk/reward dynamics of this AIG spread, open a free virtual trading account and start trading for free.

AIG shares are currently trading up 63 cents, or roughly 1.8%, to $35.74. It looks like at least one investor could be calling for more than 45% of upside throughout the longer-term (that’s right, 45%!). AIG did not announce any notable news today, but a Wall Street Journal report said the company’s employees plan to return $45 million in 2009 retention payments. The company has not announced its next earnings release date, but the market anticipates the report around May 6.