Market News

September 19, 2012  Wed 9:17 AM CT

Hovnanian Enterprises is near 18-month highs, but one trader sees limited upside from here.

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)
News Archives

Education & Strategy

Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

More education articles »