Housing bulls double money in $ITB

The iShares U.S. Home Construction Fund has been rebounding for months, returning substantial profits on upside option positions.

On Dec. 18, Investitute’s tracking systems detected the purchase of 5,000 February $33 calls for $0.80 with shares at $31.01. This was clearly a new position, as open interest in the strike was just 1 contract before that session began.

Those calls traded for as much as $1.61 this afternoon, twice their purchase price. The stock rose 8.38% in the same time period, showing 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.

ITB was up 3.31% to $33.39 today. The exchange-traded fund has held up relatively well through the market’s recent volatility and outperformed the S&P 500 in the fourth quarter, rallying today after Lennar–its second-largest holding–beat earnings estimates this morning. Investitute co-founder Pete Najarian discussed LEN, which he owns, on CNBC’s “Halftime Report” this afternoon.