$DHI calls double overnight

Option traders are racking up big profits in D.R. Horton (DHI) only one day after opening bullish positions in the homebuilder.

Just yesterday, Investitute’s market scanners flagged the purchase of 4,000 July $43 calls for $0.72 to $0.87 above open interest of 99 contracts with shares at $42.08. Investitute co-founder Jon Najarian cited the unusual activity at that time on our proprietary chat service.

Those calls traded up to $1.40 today, about twice their purchase price. The stock rose 4.56% at the same time, 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 is up 0.91% to $43.62 this afternoon. The stock jumped after rival KB Home (KBH) rallied with strong quarterly results yesterday. D.R. Horton reports its own earnings numbers before the market opens on July 30.