Realogy selloff brings out the bulls

David Russell (david.russell@optionmonster.com)

Realogy got hammered on a bad earnings report today, but traders are buying the dip.

The owner of real-estate companies including Coldwell Banker and Century 21 is down 11.32 percent to $37.83 in afternoon trading after announcing a quarterly loss that was wider than expected. Shares touched as low as $36.36 late in the morning, a level last seen in December 2012.

optionMONSTER's Heat Seeker monitoring program is showing unusual activity in the calls, starting with a block of 2,500 January 40s purchased for $2.75. Those contracts will provide cheap upside exposure , letting the investor profit from a rally at limited cost, but they can expire worthless if shares decline. (See our Education section)

About 30 minutes later, another transaction appeared in September. This time, 2,500 calls were sold in the 45s for $0.40 as an equal number of September 40 calls were purchased for $1.40, resulting in a net cost of $1. Volume was below previous open interest at the higher strike, so the investor may have rolled a bullish position lower or opened a new vertical spread .

While profit missed forecasts, RLGY's revenue beat estimates. Interest rates have also been falling as employment data has improved, which could make some investors believe that residential real estate will improve later this year.

Overall option volume in Realogy is 32 times greater than average in the name so far today, according to the Heat Seeker. Calls account for a bullish 73 percent of the total.


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