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Housing bulls are turning to MDC

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Homebuilder stocks have been searching for direction, but today traders are betting that MDC Holdings will continue its recent rebound.

optionMONSTER's Heat Seeker tracking system shows heavy buying in the March 30 calls, where more than 6,500 contracts have traded for $0.65 to $0.85. Open interest in the strike was just 439 contracts before the session began, indicating that new positions were established.

These long calls lock in the price where the stock can be purchased for the next four weeks no matter how far it might climb. They could be sold if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $30. (See our Education section)

MDC is up 1.57 percent to $29.67 this afternoon, continuing to work its way higher since finding support at $28 in recent days. The stock began this month at the $31 level but fell with a disappointing quarterly report on Feb. 5.  

Total option volume in the name tops 6,800 contracts, already 10 times its full-session average for the last month. Only 43 those contracts are calls, a reflection of the session's bullish sentiment.

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