What's Behind the Huge PulteGroup Call Sale?

| About: PulteGroup, Inc. (PHM)

By Chris McKhann

PulteGroup (NYSE:PHM) is trading higher after reporting earnings this morning but is seeing huge option action that is looking for limited gains.

PHM is up 4.4 percent to trade at $8.33. This is still in its range since last Wednesday, though the homebuilder's stock has been in an uptrend since early March when it bounced off of support at $6.50.

optionMONSTER's systems detected a huge trade at the January 2013 strike, where a single block of 30,639 of the 10 calls went for $1.30. This was the bid price at the time, so the calls were sold. There was no corresponding trading in PHM shares at the time that we can see.

The seller apparently does not believe that PHM will see much upside above $10 in the next year and a half. If the calls were sold naked they have a bearish bent, even though they will profit with the stock anywhere below $11.30.

If the contracts were sold against previously purchased PHM shares in a covered call strategy, the position is bullish up to $10. (See our Education section)

About this article:

Tagged: , , Residential Construction, Options
Want to share your opinion on this article? Add a comment.
Disagree with this article? .
To report a factual error in this article, click here