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Ocwen Financial draws bullish plays

David Russell (david.russell@optionmonster.com)

Ocwen Financial reported mixed results, but someone liked what they saw.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 2,000 May 35 calls for $1.85. Volume was almost 4 times previous open interest at the strike, indicating that new money was put to work.

The investor now has the right to buy shares in the mortgage-servicing company for $35 in the next 2-1/2 weeks, no matter how high they might go. The calls could provide significant leverage on even a modest move in the stock. For instance, a 12 percent gain in the share price to $40 would almost triple the option investment. (See our Education section)

OCN is down 1.87 percent to $35.78 in morning trading. It rallied some 400 percent between March 2012 and March 2013 but has been drifting lower since.

The company is a member of a fast-growing industry that specializes in servicing mortgage loans, a job increasingly outsourced by big banks in the wake of the subprime crash. (See their dedicated page on researchLAB for more.)

Today's earnings report showed net income more than doubling and revenue up 147 percent. Profit number lagged analyst estimates, while the top-line number beat.

Total option volume is almost twice the daily average in the stock so far today, with calls outnumbering puts by 7 to 1.

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