This Day On The Street
Continue to site
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

Bulls Pile Into Housing Sector

By David Russell, reporter at OptionMonster

NEW YORK -- The bulls piled into homebuilders and related stocks on Friday, triggering a flurry of upside option activity.

Mohawk Industries (MHK), a maker of flooring products, hit shortly after the open as investors snapped up the November 115 calls, most of which priced for $9.85. More than 2,400 of the options traded against previous open interest of just 195 contracts, indicating that new positions were initiated. Mohawk rose 3.58% to $121.38.

These calls lock in the price where shares can be purchased, letting investors cheaply position for upside and control the amount of money that can be lost to the downside. They can also generate significant leverage when a stock goes up.

Less than an hour later, lumber company Weyerhaeuser's (WY) October 30 calls traded more than 5,000 contracts, most of which priced for 25 cents. Upside activity followed in cement giant Cemex (CX), with almost 7,000 October 11 calls going for 63 cents to 68 cents. Weyerhaeuser rose 2.7% to $28.51, and Cemex advanced 2.16% to $11.33.

Investors targeted home-improvement company Lowe's (LOW) in another transaction. OptionMonster's scanners showed the purchase of 5,100 September Weekly 46 calls expiring this Friday for 47 cents and the sale of an equal number of Weekly 47 calls for 12 cents. The strategy will control a move between the two strike prices for just 35 cents, implying profit of almost 200% on a close above $47 five days from now. Lowe's fell 0.57% to $45.60.

Finally, after nibbling around the edges of actual homebuilders, traders targeted KB Home about halfway through the morning. This time they wanted a little more time and amassed more than 5,500 January 16 calls, with the biggest block fetching $2.26. KB Home ended the session up 2.14% to $16.24.

Russell has no positions in any of the companies mentioned in this article.

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

Portfolio Manager Jim Cramer and Director of Research Jack Mohr 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

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%
TSLA $226.03 0.00%
YHOO $42.51 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports