Housing bulls nail $DHI trades

Homebuilders have chalked up strong gains this year, and option traders are posting significant gains in D.R. Horton.

On Nov. 7, Investitute’s market scanners detected the purchase of 4,607 January $43 calls for $3.50 as part of a bullish roll with shares at $45.26. Open interest in the strike was only 484 contracts before the trade occurred, showing that it was a new position.

Those calls were marked today at $8.50, nearly 2.5 times their purchase price. The stock rose 12.8 percent in the same time period, reflecting the type of leverage that can be obtained 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 hit a 52-week high of $51.83 this morning but pulled back to close at $51.07, off 0.53 percent on the session. The company has rallied with other homebuilders and related names as the housing market continues to recover.