Markets

How one investor is staying in Ocwen

Someone wants to give Ocwen Financial room to run.

optionMONSTER's monitoring programs detected the purchase of 1,000 August 50 calls for $1.28 and the sale of an equal number of September 55 calls for $0.68. Volume was below open interest in the August contracts, indicating that an existing short position was closed and rolled forward in time.

The investor almost certainly owns shares in the mortgage-servicing company and sold calls to collect premium. That forces the trader to unload the stock if it closes above the strike price, so adjusting the trade lets him or her make more money through options in the meantime.

In this case, the investor can sell it for $5 more and paid $0.60 for that right. In addition, the trader agreed to remain in the position for an additional month. (See our Education section for more on covered calls .)

OCN fell 0.18 percent to $51.02 on Friday but has more than doubled in the last year. It's been rampaging higher, fueled by triple-digit revenue growth, after cheaply snatching up mortgages from big lenders. The company now stands to benefit from an improving credit cycle and higher interest rates, which could dissuade borrowers from refinancing the loans it services. (See researchLAB for more on the mortgage-servicing industry , which has delivered 3 times the performance of the broader market in the last 12 months.)

Overall option volume was slightly above average in the name on Friday, with calls accounting for about two-thirds of the total.

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

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


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

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