This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bulls Come Back to Homebuilders

Stocks in this article: KBH DHI

By David Russell, reporter at OptionMonster

NEW YORK -- Homebuilders have been pausing after a big run, and Monday momentum buyers came back to the group.

OptionMonster's tracking programs detected the purchase of 10,000 May 21 calls on KB Home (KBH) for 65 cents. This is fresh buying, as the volume was almost nine times higher than the open interest in the strike before the session began.

These long calls lock in price where the stock can be purchased no matter how high it might climb. Because they are cheaper than buying shares directly, these options limit the amount money that can be lost if the stock falls while offering the potential for significant leverage in a rally.

For instance, KB Home's shares were unchanged at $20.44 when the contracts hit and then pushed higher to end the session at $21.02, up 2.84%. The calls, meanwhile, appreciated more than 40% to 95 cents.

D.R. Horton (DHI) saw similar activity in the afternoon, with the May 21 calls bought for $1.65 to $1.80. The company, which reports quarterly results Thursday morning, rose 1.73% to $22.36. Its calls inched up to $1.90.

Homebuilders have been strong over the long term, ranking as the No. 4 group on our proprietary ResearchLab market scanner in the last 12 months. But they've lagged in the last six months or so, bringing many names back to potentially interesting levels.

Total option volume was more than eight times greater than average in each name.

Russell has no positions in KBH or DHI.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,632.88 -39.72 -0.22%
S&P 500 2,043.03 -8.79 -0.43%
NASDAQ 4,738.8610 -19.0180 -0.40%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters