Will Eagle Materials take wing again?
Eagle Materials attracted a complex bullish position today as traders looked for the company to benefit from a stronger housing market and growing economy.
optionMONSTER's Heat Seeker monitoring program detected the purchase of about 1,200 July 90 calls for $9.73. About 1,200 contracts each were sold at the same time in the July 80 puts for roughly $4.40 and the July 100 calls for $4.73. There was no open interest at any of the strikes, showing that these are new positions.
Long calls lock in the price where investors can buy a stock, while short calls generate income and obligate them to sell if a certain level is reached. Short puts also bring in cash but force traders to buy shares if they fall to a certain level. (See our Education section)
Combining the three is bullish and highly leveraged, using the money from the 80 puts and the 100 calls to cover almost all the cost of the 90s. The investor now stands to collect $10 if EXP closes at $100 or higher on expiration, a gain of 1,567 percent based on a $0.60 outlay. He or she also faces risk below $80 because of the short puts.
EXP is down 2.23 percent to $89.85 in afternoon trading. The provider of building materials such as cement, drywall, and aggregate has been treading water for most of the year following a big rally in 2012 and 2013. While results have mostly lagged estimates, investors may believe that it will follow the recent strength in homebuilders and related companies .
Total option volume is 5 times greater than average in EXP so far today, according to the Heat Seeker.
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