Options Trading News

August 15, 2013  Thu 11:56 AM CT

Ryland has been beaten down along with other homebuilders, but one trader is looking for a bounce in the next month.

optionMONSTER's Heat Seeker system shows that 1,841 September 35 calls have traded in a strong buying pattern today with premiums rising from $1.10 to $2.39. These are clearly new positions, as open interest in the strike was just 225 contracts before the trades appeared.

The volume isn't huge, but it is notable for a strike that has averaged just 32 contracts in the last month. More than 500 September 33 puts were sold for $1.55 above open interest, another bullish indication.

The combination long calls and short puts creates highly bullish positions, as the value of the calls will appreciate as the puts decline if the stock rallies. However, the opposite will occur if the shares fall. (See our Education section)

RYL is up 2.96 percent to $35.83, reversing course intraday after bouncing off a support level around $34 that has held support since last December. The company is the latest homebuilder to see upside option activity despite the recent sector decline. Earlier today D.R. Horton drew call buying, following bullish trades yesterday in Hovnanian and Lennar.

Total option volume in RYL is more than 2.5 times its full-session average for the last month. Calls outnumber puts by 3 to 1.
Share this article with your friends


Premium Services

Education & Strategy

Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

View more education articles »