Bulls double money in $PHM

PulteGroup (PHM) has been running higher for months, and option traders continue to log significant profits.

On Oct. 11, Market Rebellion’s proprietary programs flagged the purchase of 2,300 January $38 calls for $1.70 to $1.89 with shares at $37.25. There was no open interest in the strike before these trades occurred, showing that they were new positions.

Those calls are marked at $3.38 today, about twice their initial purchase price. The stock rose 8.08% in the same time period, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

It is the second winning trade in the name posted on Market Rebellion since Oct. 25.

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.

PHM rose to $40.63 early this morning but is now off 0.26% to $40.31. The homebuilder beat estimates on its quarterly results Oct. 22.

(Disclosure: I am long PHM.)