Yesterday's non-action by the Federal Reserve has the bears
targeting builders such as KB Home.
optionMONSTER's Depth Charge tracking system detected
short-term put buying
in the Los Angeles-based company yesterday as some 4,200 Weekly 18
contracts were bought for $0.65. Those puts expire at the end of
tomorrow's session, so traders are clearly looking for a selloff
sooner rather than later.
KBH continued falling, and the paper hit again. This time traders
sold all the 18s for $0.88 to $0.93 and rolled their position to
the 17.50s, which were bought for $0.50. The size of the position
was increased to 6,600 contracts.
Puts lock in the price where shares can be sold, which gives them
an inverse correlation to the stock price. The recent activity is
especially bearish because traders are using
strikes, which provide significant leverage. (See our
KBH is down 2.17 percent to $17.11 in afternoon trading.
Homebuilders have struggled in the last six months as higher
interest rates have raised fears about the housing market. The
Federal Reserve's announcement yesterday afternoon added fuel to
that fire because central bankers removed language supporting
Total option volume is triple the daily average so far today,
according to the Depth Charge. Puts dominate the activity,
outnumbering calls by a bearish 6-to-1 ratio.
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