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USG bulls turn constructive

USG has been in pain along with the housing market, but now the bulls are charging back.

optionMONSTER's Heat Seeker tracking system detected a surge of call volume in the company, which makes sheetrock and other building supplies. The activity started with a long position in the September 8 contracts getting rolled to the September 9 strike as an investor took profits and looked for more upside.

Buying continued in the September 9s, and was followed by new positions in the September 10s and the October 11s. By the end of the session, more than 7,400 calls had traded against just 415 puts. Total volume was 5 times greater than average.

USG was up more than 5 percent when the call roll appeared, but then continued higher and ended the session with a 13 percent gain at $9.68.

The rebound comes after the stock fell to its lowest level since early 2009, weighed by poor demand and a weak housing market. Its last earnings report on July 22 missed expectations on the top and bottom lines.

But now there could be reasons to hope for better times. This year's tornadoes and hurricane, for example, may stimulate demand for repairs, and the company is also in the process of closing distribution facilities and brands.

Those kinds of moves often mark bottoms for companies like USG, which is struggling with weak demand and a hefty debt load. Short interest was more than 20 percent of the float in mid-August, which could also help propel the stock higher.

(A version of this post appeared on InsideOptions yesterday.)

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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