Bulls looking for home in PulteGroup
David Russell | [email protected]
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.