Option Bears Circle Ocwen Financial Corporation (OCN)

Ocwen Financial Corp (OCN) option bears are active after the firm delayed its annual report

by Andrea Kramer

Published on Mar 18, 2015 at 1:45 PM
Updated on Apr 20, 2015 at 5:32 PM

Option bears are blitzing Ocwen Financial Corp (NYSE:OCN), after the firm once again delayed its annual report, and said it will sell $9.6 billion in mortgage servicing rights to a Walter Investment Management Corp (NYSE:WAC) subsidiary. After being temporarily halted and landing on the short-sale restricted list, OCN was last seen 1.7% lower at $8.84, and puts are trading at twice the normal afternoon clip.

More than 9,000 OCN puts have traded thus far -- three times the number of calls exchanged. Most active is the March 8 put, which it appears traders are buying to open to gamble on a retreat south of $8 by Friday's close, when front-month options expire. OCN hit an intraday nadir of $8.06 today.

Even before today's drama, OCN option players were picking up puts at a near annual-high clip. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 7.03 stands higher than 96% of all other readings from the past year.

In the same vein, OCN's Schaeffer's put/call open interest ratio (SOIR) of 1.94 registers in the 96th percentile of its annual range. In simpler terms, near-term option players have rarely been more put-biased during the past 12 months.

Meanwhile, short interest accounts for nearly one-third of OCN's total available float. Among analysts, just one of six offers up a "buy" or better rating, underscoring the rampant skepticism on the Street.

On the charts, it's been a rough ride for Ocwen Financial Corp (NYSE:OCN), with the stock surrendering roughly three-quarters of its value in the past year. Since its post-earnings bear gap in late July, the equity's rebound attempts have been halted by its descending 60-day moving average. Off the charts, OCN continues its efforts to raise cash, but today warned that a failure by Home Loan Servicing Solutions Ltd (NASDAQ:HLSS) to meet funding obligations "could have a material negative impact" on the company's financial situation.

Daily Chart of OCN since June 2014 with 60-Day Moving Average

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