Housing bulls cash in on $DHI

Option traders have doubled their money on upside positions in D.R. Horton.

On Feb. 11, Investitute’s proprietary programs flagged the purchase of 4,000 August $42 calls in one print for $2.12 with shares at $37.48. This was clearly a new position, as open interest in the strike was only 280 contracts before that session began.

Those calls traded for as much as $4.11 today, about twice their purchase price. The stock rose 14.57% in the same time period, underscoring how options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

DHI climbed to $43.36 today before closing at $42.54, up 2.28% on the session. The stock jumped along with shares of other homebuilders today as Lennar and KB Home rallied after their quarterly results.