Options Trading News

September 13, 2012  Thu 12:20 PM CT

Housing stocks have been strong, and one long-term investor is playing that move with PulteGroup.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 15,000 January 2014 15 calls for $3.75 and the sale of an equal number of January 2014 25 calls for $0.95. Volume was more than 5 times open interest at both strikes.

The trade cost $2.80 and will earn a profit of 257 percent if the homebuilder closes at $25 or higher by early 2014. It's known as a bullish call spread because it leverages a move between two prices.

PHM is up 2.44 percent to $15.93 in afternoon trading and is up more than 80 percent in the last three months. The homebuilder has been riding a wave of investor enthusiasm as demand for housing improves and years of losses come to an end.

Today's call spread provides the investor with exposure to a continued rally while limiting risk in the event of a pullback. (See our Education section for more on how options can be used instead of stock.)

More than 32,000 contracts have traded in PHM so far today, more than 4 times its daily average. Calls account for more than 95 percent of the total.
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