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Pullback draws more bulls to Masco

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Contruction-products company Masco got hit hard along with other homebuilding-related names last week, but traders are positioning for a rebound in the next four months.

optionMONSTER's Heat Seeker system detected heavy buying in the October 21 calls as premiums rose from $0.85 to $1.20 on Friday. More than 4,400 of those contracts traded in volume well above the strike's previous open interest of 2,935, indicating new activity.

These long calls , which lock in prices where traders can buy the stock, are looking for MAS to rally above $21 by mid-October. But those contracts will expire worthless if the shares remain below that strike price. (See our Education section)

MAS fell 2.85 percent on Friday to close at $19.06, breaking below its 50- and 100-day moving averages. The stock had climbed steadily since trading at the $7 level in August 2012, hitting a five-year high of $22.83 on May 22, but dropped sharply last week on fears that rising interest rates would stunt the housing market's recovery.

The company, which manufactures products ranging from cabinets to faucets, is scheduled to report second-quarter earnings on July 30 and third-quarter numbers on Oct. 29, seven sessions after the October calls expire. The Heat Seeker found upside option trades on two other occasions this month, with call activity on June 12 and bullish buying on June 6 .

Total option volume in the name on Friday was nearly triple its daily average for the last month. Calls outpaced puts by more than 3 to 1.

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