KB Home has been falling since 2005, but one investor is looking for a long-term rebound.
optionMONSTER's Heat Seeker tracking system detected the purchase of about 10,000 January 2013 12.50 calls. Premiums began at $2.23 and then rose, with the largest single block pricing at $2.30.
The shares climbed on heavy volume as the trades appeared, which also reflects the strong buying interest. Volume was about triple the open interest in the strike when the session began.
KBH rose 1.6 percent to $11.46 on Friday but is down 15 percent so far this year as the housing bubble continues to deflate. The company reported a sharp drop in orders when it announced earnings results on April 5 and said demand remained weak despite the onset of spring--usually the busiest season for the industry.
The shares gapped lower on that news but seem to be making a higher low than where they based out in 2010. Short interest in the name is more than 30 percent of the float, which could also potentially drive the stock higher.
Friday's call buying was particularly noteworthy because it was so far into the future. The strategy essentially gives the investor the ability to profit from a rebound at some point in the next one or two years without forcing him or her to time the entry. And if KBH fails to rally or continues lower, the only loss will be the initial outlay.
The trade pushed total option volume in the name to 3 times greater than average in the name, with calls accounting for a bullish 96 percent of the activity.
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