Bulls score quick profits in $LEN

Option traders have doubled their money on upside positions opened in Lennar ahead of its earnings report tomorrow morning.

On March 20, Investitute’s tracking systems detected the purchase of 5,500 May $50 calls for $1.16 to $1.25 with shares at $46.62. Volume was well above the strike’s open interest of 1,352 contracts, showing that this was fresh buying.

Those calls traded for $2.63 seconds before today’s closing bell, more than twice their purchase prices. The stock rose 6.69% in the same time frame, underscoring how quickly options can far outpace gains in 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.

LEN was up 0.32% to $49.71 today. Homebuilders have rallied in recent weeks as mortgage rates have declined.