Puts target two homebuilders at once
Chris McKhann | email@example.com
Earlier today we reported some put buying in D.R. Horton on InsideOptions Pro, and since then our systems have detected action in two more homebuilders. A block of 11,901 KB Home May 9 puts sold for the bid price of $0.76. The volume was 3 times the previous open interest.
Shortly after, a block of 8,083 Lennar May 26 puts were bought for $1.11, above the ask price. This too was well above the existing open interest.
This institutional-size interest in homebuilder puts could be a coincidence--but, as frequent readers know well, I don't believe that there are any random coincidences in trading. So both trades could be part of a relative-value strategy, selling the puts in KBH to purchase the LEN contracts. (See our Education section)
Relative-value trades are very popular with hedge funds. The beauty of this type of play is that it can potentially profit regardless of overall market action.