Homebuilders ETF Draws Call Buyers

By Jon "DRJ" Najarian, co-founder of OptionMonster

NEW YORK (TheStreet) -- Upside option activity exploded in the SPDR S&P Homebuilders (XHB Quote) exchange-traded fund when the market surged Thursday.

The homebuilders ETF ended the session up 4.1% to $15.38 on more than double the average daily stock volume. XHB is up 18% in the last three months.

Volume in the November 16 options ballooned to 126,799 calls, more than 17 times existing open interest at the strike. Most of the large trades priced for 25 cents to 30 cents in a strong buying pattern, according to OptionMonster's real-time tracking systems.

The bulk of the option activity was concentrated in a 10-minute interval in the afternoon when the market neared its peak for the session. The trades pushed overall options volume to almost 12 times greater than average for the XHB, whose main holdings are Lennar(LEN Quote), Owens Corning(OC Quote), and Williams-Sonoma(WSM Quote).

For the calls to be profitable, shares of the ETF would need to rise roughly 6% or more before the options expire on Nov. 20. Overall calls at all XHB strikes outnumbered puts traded by more than 9 to 1.