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Long-term put trade in Hovnanian

Mike Yamamoto (mike.yamamoto@optionmonster.com)

A long-term trade is positioning for a possible drop in homebuilder Hovnanian to levels last seen a year ago.

optionMONSTER's Depth Charge system detected the purchase of 4,522 January 2015 3 puts for the ask price of $0.45. This is clearly a new position, as open interest in the strike was 1,650 contracts before the trade appeared.

These options lock in the price where traders can sell the stock in the next 16 months no matter how far it might decline. The puts could have been bought as a hedge on a long position or as an outright bet that HOV will fall below $3 by mid-January 2015. (See our Education section)

HOV rose 1.15 percent yesterday to close at $5.28, continuing to trade in the middle of a range in place for most of this month after falling with other homebuilders. The stock last traded below $3 in late August 2012.

Hovnanian, which also saw bullish call buying earlier this month in near-term contracts, is scheduled to report quarterly results on Sept. 9.

Total option volume in the name topped 8,000 contracts, compared to a daily average of 1,194 for the last month. Overall puts outnumbered calls by 7 to 1.

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