Bears Deconstructing D.R. Horton

Dec. 8.10 | About: D. R. (DHI)

By Chris McKhann

Traders are buying puts on D.R. Horton (NYSE:DHI) as the homebuilder's stock tumbles after disappointing home resale data.
DHI

DHI is down 2.36 percent to trade at $11.17. It has added 15 percent in the last two weeks after bouncing off long-term support around $9.75. The trading has caused the real volatility in DHI to more than double to 44 percent.

Dominating this morning's options volume is one print in the May 10 puts, as a trader bought 6,000 for $0.79, according to optionMONSTER's systems. The previous open interest was 4,030, so this is a newly opened position.

We do not see any DHI stock trades corresponding with these options, so it appears to be an outright bearish bet that shares will continue to drop. The stock will have to be below $9.21 at expiration for the trade to be profitable at that point. It is also possible that these are protective puts against existing long shares.

Disclosure: No position