Options Trading News

April 3, 2014  Thu 4:14 AM CT

PulteGroup is trying to recover from a sharp drop, and one trader apparently believes that the homebuilder will at least hold current levels.

optionMONSTER's tracking systems detected the sale of 2,500 July 19 puts in one print for the bid price of $1.01 yesterday. This is a new position, as the volume was above the strike's open interest before the trade appeared.

The put seller will keep the $1.01 credit as profit if PHM stays above $19 through expiration in mid-July. They trader will be on the hook to buy shares if they fall below that level, but that could be part of the strategy. Investors sometimes sell puts this way in hopes of picking up shares at an effective discount on a pullback. (See our Education section)

PHM rose 0.31 percent yesterday to close at $19.69. The stock hit a recent high of $21.26 on Feb. 26 but fell to $18.39 in the next month before bouncing this week.

PulteGroup was hammered along with other builders last month when Janet Yellen raised the prospect of higher interest rates in her first press conference as Federal Reserve chair. The stocks are now trying to pick up where they left off before that last leg down.
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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.

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