Trader sees ceiling over Hovnanian
Chris McKhann | email@example.com
HOV is up fractionally on the day, trading at $3.80. The homebuilder closed at $3.89 on Monday and traded above $4 during Friday's session. Shares were below $1 back in October.
Dominating today's option activity in the name is one print in the January 2014 5 calls. A trader sold 5,000 of those contracts for $0.65, below the listed bid price on a relatively wide bid/ask spread. Open interest in the strike was 1,415 at the start of the session, so this is a new position.
The call selling was followed by large prints in the stock, as a block of 250,000 shares was bought two minutes later for $3.85. The overall position would be delta-neutral and short volatility, looking for the stock to remain around $5 and/or for the actual volatility to be less than that implied by the options. (See our Education section)