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Ocwen trader sees limited downside

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Ocwen Financial has drifted lower since hitting an all-time high earlier this month, but one trader is betting that any further downside will be limited.

optionMONSTER's tracking systems detected the sale of 2,500 October 37.50 puts in one print for $4. This is clearly a new position, as open interest in the strike was just 242 contracts before the session began.

The put seller is looking for OCN to stay above the $37.50 strike price through expiration in mid-October. If the shares fall below that level, the trader will face the obligation to buy shares at an effective price of $33.50 once the $4 credit from the put sale is included.

OCN fell 1.65 percent to $38.79 yesterday, slipping below its 50-day moving average. The mortgage lender bounced off resistance at $36 and rose sharply after its fourth-quarter earnings at the end of February but has repeatedly encountered resistance at all-time highs near the $42 level.

Ocwen's shares peaked at $42.07 on March 6. The fast-growing mortgage-servicing sector has pulled back in the last month, but only after growing nearly 80 percent in the last year, according to our researchLAB analysis tool.

Total option volume in the name exceeded 5,400 contracts yesterday, more than double its daily average of 2,009.

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