Options Traders Bearish on Homebuilders

By David Russell, reporter at OptionMonster.

NEW YORK ( OptionMonster) -- Homebuilders have been hot, but option traders are looking for some of them to cool down.

Stocks such as KB Home ( KBH), D.R. Horton ( DHI), and Beazer Homes ( BZH) are up 13% to 23% in the last month, outpacing the S&P 500 as buyers shop for value in a sector that has yet to recover from the 2008 housing bust. But Thursday, that activity started to turn bearish.

The biggest name under the gun was KB Home, in which unloaded 15,700 January 15 calls for 45 cents to 48 cents against open interest. OptionMonster's tracking systems detected buying in those contracts for 30 cents about three weeks ago, but the stock wavered at a seven-month high and investors were heading for the exit.

Now there is new activity that could be even more ominous: Buying in the February 12 puts for 25 cents to 27 cents. Volume is far above open interest at 4,188 contracts, which means new bearish positions are being opened. KB Home surrendered most of its gains and ended the session up just 0.14% to $14.33.

A similar pattern unfolded in D.R. Horton, in which investors sold more than 5,000 February 14 calls for 25 cents, wagering that the shares will remain below $14 through expiration. It hasn't traded that high since early May, ending Thursday up 3.47% to $12.87.

Toll Brothers ( TOL) was the strongest name in the sector, rallying 5.28% to $20.93. That came one day after it appeared on our systems as buyers stepped into the January 21 calls and the March 22.50s. Both of those contracts more than doubled from Wednesday's prices.

Another noteworthy trade occurred in Lennar ( LEN) -- traders sold about 10,000 January 19 puts for 75 cents against open interest of 3,235 contracts. The stock rose 0.21% to $19.14.

Russell has no positions in the stocks mentioned.

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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