Time is money for Lennar strategy
David Russell | [email protected]
optionMONSTER's screening programs detected a trade in of 3,150 February 41 calls for $1.73 against open interest of 3,429 contracts. Less than a minute later, an equal number of May 44 calls were sold for $2.04 but volume was below open interest in those.
It appears the investor owns LEN shares and is using the options as part of a covered call strategy. The trader was on the hook to sell their stock for $41 if it closed above that level on February expiration, but he or she adjusted it to the higher strike.
The investor now stands to make an additional $3 on the equity while collecting an additional $0.31 of income. In return for that extra money, the trader agreed to remain in the position for an additional three months. (See our Education section for more on how to profit from the passage of time.)
LEN rose 2.46 percent to $41.22 yesterday. Shares are up 100 percent in the last year amid improved sentiment toward homebuilders, and yesterday's trade reflects a belief that it will continue to work its way higher.
The transaction also pushed total option volume in the name to quadruple the daily average.