The bulls piled into homebuilders and related stocks on Friday,
triggering a flurry of upside option activity.
Mohawk Industries, a maker of flooring products, hit shortly after
the open as investors snapped up the November 115 calls, most of
which priced for $9.85. More than 2,400 of the options traded
against previous open interest of just 195 contracts, indicating
that new positions were initiated. MHK rose 3.58 percent to
lock in the price where shares can be purchased, letting investors
cheaply position for upside and control the amount of money that
can be lost to the downside. They can also generate significant
leverage when a stock goes up. (See our
Less than an hour later, lumber company Weyerhaeuser's October 30
calls traded more than 5,000 contracts, most of which priced for
$0.25. Upside activity followed in cement giant Cemex, with almost
7,000 October 11 calls going for $0.63 to $0.68. WY rose 2.7
percent to $28.51, and CX advanced 2.16 percent to $11.33.
Investors targeted home-improvement company Lowe's in another
transaction. optionMONSTER's Heat Seeker tracking system showed the
purchase of 5,100 September Weekly 46 calls expiring this Friday
for $0.47 and the sale of an equal number of Weekly 47 calls for
$0.12. The strategy will control a move between the two strike
prices for just $0.35, implying profit of almost 200 percent on a
close above $47 five days from now. LOW fell 0.57 percent to
Finally, after nibbling around the edges of actual homebuilders,
traders targeted KB Home about halfway through the morning. This
time they wanted a little more time and amassed more than 5,500
January 16 calls, with the biggest block fetching $2.26. KBH ended
the session up 2.14 percent to $16.24.
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