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Ocwen investor is buying protection

David Russell (david.russell@optionmonster.com)

One investor apparently believes that Ocwen Financial may pause after a blistering run.

optionMONSTER's Depth Charge monitoring program detected the purchase of 3,000 December 32.50 puts for $1.30 and the sale of an equal number of December 37.50 calls for $1.65. Volume exceeded open interest at both strikes, indicating that new positions were initiated.

The investor probably owns shares in the loan-servicing company and is using the options as a hedge. He or she collected an immediate credit of $0.35, adding to previous gains in the stock. This strategy, known as a collar , also locks in a minimum selling price of $32.50 in exchange for relinquishing any gains above $37.50. (See our Education section)

OCN fell 1.66 percent to $35.01 on Friday but has roughly doubled since lighting up our scanners in June. The company belongs to a nascent industry dedicated to servicing mortgage loans, which involves collecting payments and managing delinquencies. These tasks, previously performed by the lenders themselves, have been increasingly outsourced as banks put the 2008 subprime crisis behind them.

OCN enjoyed a huge run in anticipation of this growth, but momentum waned in October. It has also fallen sharply in the last three sessions, which could be raising concerns about a pullback.

Overall option volume was triple the daily average in the session, according to the Depth Charge.

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