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Hovnanian draws bearish position

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A large trader apparently believes that homebuilder Hovnanian is heading lower in the next month.

About 5,200 February 6 puts were bought for $0.25 to $0.40 on Friday, according to optionMONSTER's Depth Charge tracking system. The volume was well above the strike's previous open interest of 1,100 contracts, indicating that new positions were established.

These puts lock in the price where the stock can be sold for the next four weeks no matter how far it might fall. Because the contracts are in the money , they will track the share price closely and are likely making an outright bearish bet rather than hedging a long position . (See our Education section)

HOV fell 4.74 percent on Friday to close at $5.83, a penny off its session low. The stock had been trading in a tight range since pulling back from a 52-week high of $6.80 reached on Jan. 3.

Total option volume in Hovnanian on Friday was more than triple its daily average for the last month. Overall puts outnumbered calls by 10 to 1, a reflection of the session's bearish sentiment.

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