Lennar bulls constructing gains

Long-term upside positions rose sharply today as homebuilder Lennar reported strong earnings.

On June 2, Investitute’s proprietary programs identified the purchase of 5,000 January 2019 55 calls in one print for $6.80 with shares at $52.76. Open interest in the strike was just 10 contracts before the trade occurred, showing that it was a new position.

Today those calls were marked as high as $8.55, representing a profit of more than 25 percent. The stock was up less than 2.3 percent in the same time, illustrating how options can 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.

LEN rose 2.14 percent to close at $53.87 today after hitting a 52-week high of $55.75 in the morning. The housing-construction company surpassed estimates on the top and bottom lines before the market opened.