OptionMonster's Heat Seeker system detected the purchase of about 10,000 February 4.50 calls Thursday, almost all of them going for 20 cents. Volume dwarfed the strike's previous open interest of just 396 contracts, which indicates new money was put to work.
Long calls lock in the price where investors can buy stock, resulting in significant leverage if a rally occurs. Their relatively cheap cost also limits the amount of money at risk, as only the price of the options would be lost if shares fall.
HOV rose 1.08% to $3.74 on Thursday. The stock has been the worst-performing member of the homebuilder group on our ResearchLab market scanner for the last year.
The call-buyers are betting that it will break out of an extremely tight range in place since mid-October. Management is scheduled to present at the UBS Building and Building Products Annual CEO Conference on Nov. 13.
Total option volume was 19 times greater than average in the session, with calls outnumbering puts by a bullish 27-to-1 ratio.
Yamamoto has no positions in HOV.