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January 15, 2013  Tue 1:47 AM CT

ITB: SEE CHART GET CHAIN FIND STRATEGIES
The iShares Dow Jones U.S. Home Construction Fund is at multi-year highs, and one trader is looking for more gains by early summer.

A trader bought 2,000 July 23 calls for $1.39 and sold 4,000 July 25 calls for the bid price of $0.65, according to optionMONSTER systems. The volume at each strike was above the previous open interest, so this is new a new position.

This vertical spread costs the trader just $0.09, which will be lost if the ITB is below $23 at expiration. The maximum gain in this position, also known as a ratio spread because of the differing number of contracts at each strike, would come if the fund is around $25 at expiration. (See our Education section)

The ITB finished yesterday at $22.06, down 0.7 percent on the session. The exchange-traded fund hit a 52-week low of $13 about a year ago but last week saw its highest close in five years at $22.33.

More than 7,500 ITB options changed hands overall yesterday, compared with a daily average of 1,200. The bullish trade stood in marked contrast to put buying in many other homebuilding names yesterday.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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