OptionsHouse

Options Trading News

September 19, 2012  Wed 9:17 AM CT

HOV: SEE CHART GET CHAIN FIND STRATEGIES
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)
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »