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Masco Attracts Short-Term Bulls

By David Russell of OptionMonster
 
NEW YORK -- Masco (MAS) has gotten hammered along with other housing-related names recently, but short-term option traders are looking for a quick bounce.
 
OptionMonster's tracking systems detected heavy buying in the April 22 calls, where more than 10,700 traded mostly for 25 cents to 35 cents on Tuesday. Previous open interest in the strike was just 2,633 contracts, indicating that new money was put to work.
 
Such long calls lock in the price where a stock can be purchased, letting investors cheaply position for gains while limiting the amount of capital at risk. These contracts can also generate significant leverage in a rally but will expire worthless if shares remain below the strike price, which in this case is $22.
 
The company, which manufactures products ranging from cabinets to faucets, is scheduled to report earnings a week after those options expire.
 
Masco's shares were down 0.23% Tuesday to close at $21.86. The stock had run from a recent low of $20.60 on March 27 to $23.42 last Friday, but it gave up most of those gains as the broader market sold off in recent days.
 
Overall option volume in Masco was nearly six times its daily average, with calls making up a bullish 96% of the total.
 
(Russell has no positions in MAS.)

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.

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