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• Why large trader is bullish on MBIA
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Ocwen Financial has been going straight up, and the bulls are piling in.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 7,700 January 20 calls in the commercial-mortgage lender for $1.35. Volume was more than triple open interest in the strike.

Those contracts lock in the price investors must pay to buy shares, providing exposure to a rally at limited cost. That can translate into significant leverage if the stock climbs, but the options will expire worthless if no rally occurs.

OCN has been climbing for 1-1/2 years. It spent the last two weeks breaking resistance at its 2006 highs and is now back to levels last seen in 1998. It closed yesterday down 0.06 percent to $18.10 after being up for most the session.

The stock has been more active since the last quarterly report on May 3, when earnings beat expectations and delinquencies fell. Management also said the company has developed a new way to modify loans that dissuades borrowers from defaulting.

Overall option volume was 11 times greater than average in the session, with calls outnumbering puts by more than 300 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)

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