UPDATE 1-Pershing Sq. buys put options in MBIA, Ambac

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NEW YORK, Feb 14 (Reuters) - Hedge fund Pershing Square Capital Management reported new put option positions in shares of bond insurers MBIA Inc (MBI.N) and Ambac Financial Group Inc (ABK.N) and that it had divested its stake in McDonald's Corp (MCD.N).

In a filing with the U.S. Securities and Exchange Commission, the fund said that as of Dec. 31, 2007, it had options to sell 697,700 MBIA shares and to sell 1 million Ambac shares at certain prices.

Pershing Square founder William Ackman, a prominent activist investor, has been highly vocal about his views that the two major bond insurers could default on their mortgage bond obligations amid a widening credit crisis.

So far his bets against the stocks have paid off as both plummeted in value since mid-October.

Ambac has fallen from over $67 per share in October to close at $10.53 on Thursday, up $1.16, or 12.4 percent. Similarly, MBIA has dropped from over $65 in October to close at $12.62, up 98 cents, or 8.4 percent. Both trade on the New York Stock Exchange.

The filings also confirm that Pershing Square raised its stakes in retailers Borders Group Inc (BGP.N), Sears Holdings Corp (SHLD.O) and Target Corp (TGT.N).

In January alone, Pershing Square raised its holdings in Target from about 7.6 million shares as of Dec. 31, 2007, to 80.5 million shares by mid-month, the filings showed.

A separate regulatory filing released on Jan. 16 showed Pershing Square held a 9.69 percent stake in Target and had a total economic exposure to about 105 million shares, or 12.63 percent.

Ackman has said he believes Target shares are undervalued but hasn't undertaken a public campaign to pressure the company for strategic changes.

Pershing also reported on Thursday holding 6.2 million Sears shares and 10.6 million shares of Borders. (Reporting by Shivani Singh and Sayantani Ghosh in Bangalore and Dane Hamilton in New York. Editing by Jarshad Kakkrakandy and Braden Reddall)