USG calls build bullish positions

Mike Yamamoto (
June 10, 2014

Homebuilders and related names have been gaining in recent weeks, and yesterday traders were snapping up calls in construction-products maker USG.

More than 5,500 August 33 calls traded in a strong buying pattern for $1.18 to $1.50, according to optionMONSTER's Heat Seeker tracking system. Volume was well above the strike's previous open interest of just 681 contracts, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased through mid-August no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, providing potentially significant leverage, but the contracts will expire worthless if shares remain below $33. (See our Education section)

USG rose 1.48 percent to $31.60 yesterday. Shares had pulled back into a range since trading above $36 in late February--their highest price since May 2008--but have started to break out in recent days.

Total option volume in USG topped 12,800 contracts yesterday, more than 12 times its daily average for the last month. Overall calls outpaced puts by a bullish 7-to-1 ratio.

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