Call positions keep building in DHI

As housing continues to barrel ahead, bullish traders are reaping large rewards for staying with D.R. Horton.

On Sept. 13, Investitute’s market scanners identifed the purchase of 3,244 October $37 calls for $1.28 as part of a bullish roll with shares at $37.33. Open interest in the strike was only 415 contracts before the trade occurred, showing that it was a new position.

Those calls sold for $3.50 today, more than 2.5 times their purchase price. The stock rallied 13.9 percent in the same time frame, an impressive gain but nowhere near that of its options. It was one of several bullish trades in the name recently, including heavy January 40 call buying cited by Investitute co-founder Pete Najarian last Friday on CNBC’s “Halftime Report.”

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 was up 0.73 percent to $40.27 today. The stock hit a 52-week high of $40.64 this afternoon as it continues to break out along with other homebuilders.