Homebuilders have been rising as interest-rate fears abate, and option traders are looking for more gains in D.R. Horton (DHI).
OptionMonster's tracking systems detected the purchase of about 15,000 February 22 calls for 94 cents and the sale of roughly the same number of February 20 calls for $1.92. Volume was below previous open interest in the lower strike, indicating that an existing long position was closed and rolled higher.
Long calls lock in the price where a stock can be purchased no matter how far it might climb, potentially generating significant leverage. But they will expire worthless if share remain below the strike price, in this case $22 through mid-February.
D.R. Horton shares rose 2.67% to $21.13 on Monday. The stock broke out of a multi-month range on Wednesday after the Federal Reserve said it would keep interest rates low, and it is now threatening to move above its 200-day moving average for the first time since July.
Overall option volume in the name was almost 25 times greater than average in the session, with calls accounting for a bullish 97% of the total.
Fellow homebuilder Toll Brothers (TOL) saw buying in its January 36 calls in the morning for $1.15. The stock pushed higher, and those contracts ended the day bid at $1.50.
Yamamoto has no positions in DHI or TOL.