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June 21, 2013  Fri 4:45 AM CT

LEN: SEE CHART GET CHAIN FIND STRATEGIES
Lennar got hammered along with other homebuilders yesterday, but one investor isn't giving up hope.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 5,000 July 36 calls for $1.51 and the sale of an equal number of July 40 calls for $0.41, resulting a cost of $1.10. Volume was below open interest in the 40s, so there are two possible explanations of the activity.

If both halves of the trade are new positions, the strategy is a bullish vertical spread with a maximum profit of 263 percent on a move to $40 or higher. Alternatively, the trader could be rolling a long position in the 40s down to the 36s, which would maintain a strong correlation between the calls and shares of the Miami homebuilder. (See the discussion of delta in our Education section.)

LEN fell 7.69 percent to $34.94 yesterday. It more than tripled between October 2011 and early this year but has been trending lower in the last month. Yesterday's trader apparently thinks that the stock is still bullish and is looking for a rebound in the next four weeks.

Second-quarter earnings will be reported on Tuesday.

Total option volume in the name was 7 times greater than average in the session, according to the Heat Seeker. Calls outnumbered puts by 3 to 1.
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Options Academy: Ron's Risk Calculation--A Real Life Example

It is rare that I get a chance to give a real-life, real-time example in my articles that the readers were not only following but were actually involved in at the time the event is happening. Well, that is where we are right now in our QQQ trade from last week. Let's recap the trade itself.

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