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Puts bet on steep drop in Hovnanian

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Hovnanian is near its highs for the year, but a long-term trade is positioning for the homebuilder's stock to lose roughly half its value by early 2014.

optionMONSTER's Depth Charge system detected the purchase of 3,000 January 2014 3.50 puts in a single print for $0.39. This is a new position, as the volume was above the strike's open interest of 2,466 contracts at the start of the session.

HOV rose 0.9 percent on Friday to close the week at $6.72. The stock has gone on a blazing run since early June, when it was trading at 52-week lows near $1.50, but has stalled since surging to its 2012 high of $7 on Dec. 21.

Because the puts bought Friday are so far out of the money , it is unlikely that they were purchased as a protective hedge on a long position. The contracts are looking for HOV to fall back to levels near $3 from early September, before it broke out of a range in place since the beginning of the year.  

Friday's trading pushed total option volume in HOV to 16,207 contracts, more than triple its daily average in the last month.

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