Options Trading News

June 21, 2013  Fri 4:45 AM CT

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.
Share this article with your friends

Related Stories


Big put sale sees floor in Lennar

November 18, 2015

A large put sale shows confidence in the homebuilder, which beat earnings and revenue estimates on Sept. 21 while citing strong orders and pent-up demand.



The fastest money in the market
View full report »

Premium Services

Education & Strategy

The art of trading

As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

View more education articles »