AIG shares see small recovery after recent beating

NEW YORK (Reuters) - Shares of American International Group Inc (AIG.N) closed 24 percent higher on Friday, after being badly beaten down following a reverse stock split last week.

The stock has fallen more than 50 percent since July 1 when AIG did a 1-for-20 reverse stock split which raised the price from $1.16 to $23.20.

However, the move backfired, letting in a flood of short-sellers.

Investors that short a stock are taking bets that a stock is going to fall.

On Friday, AIG shares rose $2.26 to close at $11.74.

AIG option volume was high again on Friday with a total of 212,000 contracts, or five times the daily average, according to option analytics firm Trade Alert.

The turnover was dominated by traders selling premiums, likely taking profits as the stock rose.

Jon Najarian, a founder of Web information site optionMonster.com said during the session, many AIG option traders turned bullish for the first time since the reverse stock split.

"They are booking profits on their bearish bets and some appear to be even opening bullish positions in call options that became in-the-money as the stock rallied," Najarian said.

(Reporting by Lilla Zuill and Doris Frankel in Chicago; Editing Bernard Orr)