Bulls Constructive on Masco

By David Russell of OptionMonster

NEW YORK -- Housing supplier Masco (MAS) has been fighting higher, and now the bulls are getting constructive on the name.

OptionMonster's tracking programs detected the purchase of more than 2,000 January 21 calls, most of which priced for $2.14, against previous open interest of just 162 contracts. Later in the session, almost 2,000 October 22 calls were bought for $1.20 to $1.35.

Long calls lock in the price where investors can get buy a stock, allowing them to cheaply position for a rally and potentially enjoy significant leverage. That's exactly what happened a week ago when OptionMonster subscribers doubled their money from a small move in Masco's shares.

The stock fell 0.32% to $21.72 on Tuesday. Shares pulled back recently but have remained above their 50-day moving average, which could make some chart watchers expect further gains.

Tuesday's housing starts and building permits were weak, but Monday's NAHB homebuilder sentiment index beat expectations. In addition, mortgage applications have been showing signs of life recently.

Total option volume in Masco was six times greater than average Tuesday, with overall calls outnumbering puts by more than 50 to 1.

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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