Bulls double money in $XHB

The SPDR S&P Homebuilders Fund (XHB) is trading at 52-week highs, returning large gains on upside option positions.

On May 28, Investitute’s proprietary programs flagged the purchase of 5,481 July $41 calls in one print for $0.47 with shares at $39.37. This was clearly a new position, as open interest in the strike was only 355 contracts before the trade occurred.

Those calls sold for $1.10 today, more than twice their purchase price. The stock rose 4.83% in the same time frame, 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.

$XHB reached at 52-week peak of $41.61 early today before pulling back to trade at $41.18 this afternoon, off 0.7% on the session. The exchange-traded fund has rallied with homebuilders as interest rates have stayed low.