Bulls score as $DHI hits highs

Option traders doubled their money on upside positions in D.R. Horton (DHI) as shares reached a 52-week high this morning.

On Dec. 9, Market Rebellion’s Unusual Activity Service found that 3,000 Weekly $54 calls expiring tomorrow were bought for $0.95 to $1.32 with shares at $54.79. This was clearly fresh buying, as open interest in the strike was a mere 55 contracts before the activity appeared.

Those calls traded for as much as $2.10 today, more than twice their initial purchase price. The stock rose 2.34% in the same time frame, illustrating the kind of leverage that can be achieved quickly 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.

DHI was in positive territory early today this but has since pulled back to $54.72, off 2.13% on the session. The homebuilder reached a 52-week high of $56.12 this morning, following the Fed’s decision yesterday to keep interest rates unchanged.