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October 16, 2012  Tue 3:16 AM CT

DHI: SEE CHART GET CHAIN FIND STRATEGIES
D.R. Horton has slipped from a five-year high reached last month, but traders are betting that the homebuilder will resume its climb.

optionMONSTER's Heat Seeker tracking system shows that 2,571 November 18 calls traded in a strong buying pattern yesterday. Prices ranged from $2.69 to $2.93 but came in small prints, which often indicates retail trading based on a newsletter recommendation.

DHI rose 3.51 percent yesterday to close at $20.66 after falling sharply for more than a week. It had been trending higher with the rest of the sector as the housing market increasingly shows signs of recovery, and the stock's peak at $22.79 on Sept. 21 was its highest intraday price since June 2007.

Yesterday's in-the-money options are looking for a modest gain in the stock by mid-November. They will expire worthless if no rally occurs, but these long calls carry far less risk than owning shares if the stock drops.

Overall option volume in the name was 2.5 times its daily average yesterday. Calls outnumbered puts by 10 to 1, a reflection of the session's bullish sentiment.
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The homebuilder's earnings have beaten estimates for the last two quarters as the industry has come back to life, and traders see the stock holding current levels.

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