Market News

May 22, 2013  Wed 12:20 PM CT

The bulls are throwing everything they've got at drywall maker USG.

Just minutes after the opening bell today, optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 August 27 in-the-money calls for $2.90. Volume was more than 11 times previous open interest at the strike, indicating that new money was put to work on the long side.

Those contracts had a delta of 0.64, meaning they will closely track movements in the stock price. USG continued higher, and those calls have already inflated to $3.40, which shows the kind of leverage that can be achieved with options.

Now the bulls are coming back for even more. This time, the Heat Seeker shows 3,000 June 31 calls bought for $0.45, 2,500 June 30 calls bought for $0.80, and 1,000 June 26 puts sold for $0.30.  It cost them $305,000 to open this position, which will perform similarly to owning more than 180,000 shares.

USG is up 3.34 percent to $28.74 in afternoon trading. Based on its current price, the three-way option strategy provides upside exposure at less than one-tenth of the stock price.

Companies tied to housing have been among the strongest in the last year as the U.S. residential real-estate market recovers from the 2008 crash. Toll Brothers is ripping today after the homebuilder beat estimates, while Home Depot and other home-improvement retailers have been advancing as well. (See our researchLAB market scanner for a breakdown of related companies.)

USG, which also makes ceiling tiles and sealers, spent more than a week building support at its 100-day moving average before today's move. Overall option volume in the name is 9 times greater than average so far today, with calls accounting for more than 85 percent of the total.
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