Bulls double money with $PHM

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

On Aug. 4, Market Rebellion’s proprietary programs flagged the purchase of 5,600 August $45 calls for $1.14 to $1.50 with shares at $44.19. The open interest in the strike before these trades occurred was just 2,554 showing that they were new positions.

Those calls traded for as much as $2.51 today, about twice their average purchase price. The stock rose 7.49% 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.

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 make a new closing high today, up 2.46% to $47.48. The homebuilder’s shares have been on the rise along with rising home sales.