Hovnanian (HOV) gained 6% Thursday and around 5% on Friday after Bank of America upgraded the homebuilder to a buy rating from neutral. An increase in interested homebuyers is helping to stabilize sales at the company, Bank of America analyst Daniel Oppenheim suggested in a recent note to investors.
Audio Podcast:
An audio podcast of this article is available at: poweropt.com/podcasts/2007_02_05_HOV.mp3
Oppenheim’s survey of real estate agents showed improvement in Hovnanian’s core markets of Washington, D.C., Florida, Southern California, New York, New Jersey and Pennsylvania.
The company ‘s cash flow is also looking up this year and will help the builder with acquisition opportunities later this year and early next year, the analyst wrote.
Hovnanian shares have lost $0.95, or 2.5%, in trading today. In other news, homebuilder stocks surged Wednesday after the Federal Reserve kept its target federal fund rate steady.
The Federal Open Market Committee left short-term interest rates unchanged. This is the fifth meeting where rates have been left untouched after a string of 17 increases that began in 2004. This development is reported to give investors optimism about the economy’s health.
Hovnanian is primarily a single-family detached home design and construction company. They also design and build attached town homes and condominiums, mid-rise and high-rise condominiums, urban infill, and adult homes. Hovnanian offers homes for sale in 427 communities in 48 markets in 19 states throughout the United States. The company was founded in 1959 and is headquartered in Red Bank, New Jersey.
Competitors:
Competitors for HOV include: DR Horton Inc. (DHI), Lennar Corp. (LEN), and Pulte Homes Inc. (PHM).
Potential Trades:
All of the following option trades have 40 days until expiration. Hovnanian Enterprises is currently trading at $36.09. These trades were discovered using the powerful suite of option search tools found at PowerOptions .
| Covered Call – Hovnanian Enterprises Inc. (HOV) $ 36.09 (40) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HOVGC | 07 MAR 35.00 | $2.60 | 7.20% | 4.40% | 4.40% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Hovnanian Enterprises Inc. (HOV) $ 36.09 (40) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| HOVCG | 07 MAR $35.00 | $2.60 | HOVCF | 07 MAR $30.00 | $6.60 | 25.00% | $34.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an in the money covered call, offers 7.2% downside protection and a potential profit of 4.4% if the stock remains unchanged or rises. The net cost of this trade, per 100 options, is $3,355.00.
The second trade is a bull call debit spread. This trade offers 25.00% potential profit if the stock remains above $35.00. If the stock decreases below the break-even price of $34.00, the investment begins to lose money. If the stock price goes below the lower strike price of $30.00, the entire investment is lost. The net cost of this trade, per 100 options, is $405.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions’ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
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[tags]Bank of America, Daniel Oppenheim, Washington, D.C., Florida, Southern California, New York, New Jersey, Pennsylvania, Federal Reserve, Federal Open Market Committee, United States, Red Bank, DHI, D.R. Horton Inc., HOV, Hovnanian Enterprises Inc., LEN, Lennar Corp., PHM, Pulte Corp., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]