Options Trading News

July 26, 2013  Fri 3:16 AM CT

A huge trade is apparently betting on a ceiling in shares of homebuilder PulteGroup, which plunged after reporting poor quarterly results yesterday.

optionMONSTER systems show that a trader sold 20,000 January 19 calls for the bid price of $1.13 against previous open interest of 25,259. At the same time, he or she bought 20,000 January 22 calls for the ask price of $0.52 in volume that was 10 times the open interest at that strike, so it is a new position.

This could be a roll, with the trader closing the lower-strike calls and opening a new position at the higher strike. But given how far both are out of the money, this appears to be credit spread. In that case, the trader is taking in $0.61, which will be kept as profit if PHM remains below $19. (See our Education section)

PHM dropped 10.3 percent to end the session at $16.55, its lowest close since mid-December. The company, which has been hit hard along with other homebuilders because of rising interest rates, fell sharply right out of the gate yesterday after missing second-quarter estimates on the top and bottom lines.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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