Option Trader Makes Big Bullish Bet on Homebuilder PulteGroup

By Mike Yamamoto of OptionMonster

NEW YORK -- A big option trader is making a huge bet that shares of PulteGroup (PHM) will pop by the end of next week. 

More than 13,000 Weekly 19 calls expiring on Sept. 26 were purchased in about one minute for the ask price of 51 cents on Wednesday, according to OptionMonster's tracking systems. Open interest in the strike was just 525 contracts before the trade appeared, showing that this is fresh buying.

These long calls lock in the price where the stock can be bought by the end of next Friday's session no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will quickly lose value if shares stall or pull back. 

PulteGroup rose 2.48% to $19.40 on Wednesday. That was the homebuilder's first close above its 200-day moving average since the stock gapped down from above $19 with disappointing quarterly results on July 24. The trading followed strong earnings and revenues from rival Lennar and a report showing that homebuilder sentiment is at its highest level since November 2005. 

Earlier in the day PulteGroup also saw heavy buying in the September 20 puts that expire Friday, as more than 8,000 of those contracts traded for 52 cents to 95 cents against open interest of 527 options. Wednesday's total option volume in the name topped 30,000 contracts, 12 times its daily average for the last month.

 Yamamoto has no positions in PHM.

 


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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