$KBH bulls build more gains

Option traders have tripled their money in KB Home (KBH) for the second time in three sessions.

On Oct. 10, Market Rebellion’s tracking systems detected the purchase of 7,500 November $36 calls for $0.58 to $0.75 with shares at $34. Open interest in the strike was only 235 contracts before that session began, showing that this was fresh buying.

Those calls traded for as much as $1.75 today, more than 3 times their initial purchase price. The stock rose 8.65% in the same time frame, underscoring how quickly 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.

It is the second winning trade in the name posted on Market Rebellion since Oct. 17.

KBH reached a 52-week high of $36.92 earlier in the session before pulling back to $36.42 this afternoon, off 0.16% on the day. The company has been rallying along with other homebuilders all year.