Lennar got hammered along with other homebuilders yesterday, but
one investor isn't giving up hope.
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 5,000 July 36 calls for $1.51 and the sale of an equal number of
July 40 calls for $0.41, resulting a cost of $1.10. Volume was
below open interest in the 40s, so there are two possible
explanations of the activity.
If both halves of the trade are new positions, the strategy is a
bullish vertical spread
with a maximum profit of 263 percent on a move to $40 or higher.
Alternatively, the trader could be rolling a long position in the
40s down to the 36s, which would maintain a strong correlation
between the calls and shares of the Miami homebuilder. (See the
LEN fell 7.69 percent to $34.94 yesterday. It more than tripled
between October 2011 and early this year but has been trending
lower in the last month. Yesterday's trader apparently thinks that
the stock is still bullish and is looking for a rebound in the next
Second-quarter earnings will be reported on Tuesday.
Total option volume in the name was 7 times greater than average in
the session, according to the Heat Seeker. Calls outnumbered puts
by 3 to 1.
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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