Markets

KB Home trade buys time

Investors are betting that some homebuilders are on firm ground.

optionMONSTER's tracking systems have detected a series of trades in recent sessions that reflect improved sentiment in the industry following years of bearishness. Yesterday and last week, money-losing bets on Lennar were adjusted, giving investors more time for the shares to rebound.

Similar activity is taking place today in KB Home, which has lost more than half its value this year and is now down 4.76 percent to $5.17 -- its lowest piece since September 1991. A block of 13,000 September 8 puts were bought for $2.72 and an equal number of October 5s were sold for $0.50.

Volume was below open interest in September but not October, which suggests that an existing short position was rolled to the lower strike and forward in time. That lowers the price at which the investor must buy stock. It resulted in a cost of 2.22, and keeps them in the trade for another month.

Trades such as these have been common after the market's crash in early August, which left many short put trades deeply underwater. See our Education Section for more.

Overall options volume in KBH is 12 times greater than average so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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