Bulls triple money in $KBH

KB Home (KBH) is trading at 52-week highs, yielding large returns on upside option positions.

On Sept. 25, Market Rebellion’s market scanners identified the purchase of 2,700 October $33 calls for $0.90 to $1.20 with shares at $32.14. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 1,037 contracts.

Those calls are marked at $3.30 this morning, more than 3 times their average purchase price. The stock rose 12.76% in the same time period, underscoring how options can far outperform 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.

KBH is up 1.54% to $36.24 this morning. The company, which has been rallying with other homebuilders all year, reached a 52-week high of $36.48 today.