A big trader is making a huge bet that shares of PulteGroup will pop by the end of next week.
More than 13,000 Weekly 19 calls expiring on Sept. 26 were purchased for the ask price of $0.51 in about 1 minute yesterday, according to optionMONSTER's Heat Seeker tracking system. Open interest in the strike was just 525 contracts before the trade appeared, showing that this is fresh buying.
These long calls lock in the price where the stock can be bought by the end of next Friday's session no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will quickly lose value if shares stall or pull back. (See our Education section)
PHM rose 2.48 percent to $19.40 yesterday. That was the homebuilder's first close above its 200-day moving average since the stock gapped down from above $19 with disappointing quarterly results on July 24. The trading followed strong earnings and revenues from rival Lennar and a report showing that homebuilder sentiment is at its highest level since November 2005.
Earlier in the day PulteGroup also saw heavy buying in the September 20 puts that expire tomorrow, as more than 8,000 of those contracts traded for $0.52 to $0.95 against open interest of 527 options. Yesterday's total option volume in the name topped 30,000 contracts, 12 times its daily average for the last month.
(A version of this post appeared on InsideOptions Pro yesterday.)
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