Ocwen Financial has been consolidating after a big move, and now traders are making a stand on the loan processor.
optionMONSTER's screening programs detected the sale of about 10,000 January 55 puts, most of which priced for $2.05. Volume was more than twice open interest at the strike, indicating that new positions were initiated.
Investors sell puts when they like a stock but don't want to expend capital getting long. The strategy lets them collect premium now in return for agreeing to buy shares on a drop below the strike price. In the case of today's trade, they must get long OCN for $55 if it goes under that level. Including the income already collected, their cost basis would be $52.95. (See our Education section)
OCN is up 1.02 percent to $56.32 in afternoon trading. The stock roughly quadrupled from May to September and has been consolidating since. It fell sharply after the last earnings report on Oct. 31 missed estimates, but it rebounded in November and today's put seller is looking for support to hold at the 50-day moving average.
Total option volume is more than twice the daily average so far, with those short puts accounting for almost all the activity.
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