Someone wants to own Beazer Homes and is using options to create
a highly leveraged position.
Our Heat Seeker tracking system detected the purchase of 10,000
June 2.50 calls in the debt-laden homebuilder for $0.20. An equal
number of June 2.50 puts were sold in the following seconds for an
average premium of $0.18. There was barely any open interest in
either contract before the activity appeared.
The position cost just $0.02 to open and will double in value for
every $0.02 that BZH trades over $2.52. It will also lose money
below $2.50, which makes it very similar to owning the stock.
The main difference is in cost: Today's trade allows the investor
to control the equivalent of 1 million shares for less than
one-hundredth of the price. (See our
section for more on how options can be used to generate leverage.)
BZH is off 3.52 percent to $2.47 today. It more than doubled
between October and February but has been pulling back since then.
Now the stock is attempting to hold its ground at its 200-day
moving average and the same level where it peaked twice in
December, which could be leading some chart watchers to believe
that it's at an attractive entry point.
Overall option volume is 39 times greater than average so far
today, according to the Heat Seeker.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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