Housing bulls building calls in MDC


Housing stocks have been trying to rebound in the last week, and yesterday the bulls piled into homebuilder MDC Holdings.

optionMONSTER's Heat Seeker system detected upside option activity in the October 30 calls, where nearly 2,700 contracts traded for $1.15 to $1.75. The volume was well above the strike's previous open interest of 417 contracts, indicating that new positions were established.

These long calls lock in the price where shares can be purchased, letting investors benefit from gains in MDC for much less capital than buying the stock directly. The options can also provide significant leverage in a rally, but they will expire worthless if shares remain below $30 through mid-October. (See our Education section)

MDC rose 2.36 percent to $29.97 yesterday, heading back toward its 50-day moving average after selling off from June to August. Other homebuilders and related names have seen bullish option action this week, including KB Home, Lowe's, and Mohawk Industries. (See r elated story )

Total option volume in MDC was 5 times greater than average yesterday, with calls outnumbering puts by 26 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)

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