Bulls sign up with Nationstar Mortgage

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The bulls are piling into Nationstar Mortgage as the stock makes new highs.

optionMONSTER's monitoring systems detected a block of 2,600 January 20 puts trade for $2.95. That was the bid price at the same, indicating that the contracts were sold.

Investors sell puts when they like a stock but don't want to expend cash getting long. It allows them to collect a credit in return for providing protection to other traders.

In the case of yesterday's activity, the trader will have to buy NSM for $20 if it closes below that level on expiration. But including the credit earned, the entry price would be $17.05.

Put selling often occurs when a stock is rallying hard because it prices in the possibility of a pullback. (See our Education section for more ideas on how to manage entries and exits using options.)

Investors also purchased about 2,300 January 22.50 calls for $3.70 to $4.10 throughout the session. Those trades reflect a strong belief the stock will keep rallying into early 2012.

NSM rose 4.09 percent to $22.40 and is up 60 percent since going public at $14 in March. The company has been gobbling up servicing rights on residential mortgages in hope of a turnaround and now stands to grow fee income as refinancing accelerates.

Total option volume in the name was 5 times greater than average.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: NSM

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