CHICAGO, Feb 2 (Reuters) - Many bullish option investors on Tuesday appear to be betting that shares of homebuilder Standard Pacific Corp (SPF) will jump at least 25 percent within the next few weeks.
It's been a big day for options trading in Standard Pacific, as traders exchanged about 11,000 contracts by early afternoon, 49 times greater than its recent average daily turnover, according to option analytics firm Trade Alert.
Trade Alert data show that directional sentiment based on order flow was 68 percent bullish with roughly 11,000 calls traded against only 158 puts.
Investors made a beeline for the March, June and September call options, giving them the right to buy shares at $5 apiece -- a strike price above the current value of the stock.
On the New York Stock Exchange, Standard Pacific shares rose 8.07 percent, or 31 cents to $4.15.
Earlier in the session bullish players paid 20 cents per contract to buy roughly 5,000 March $5 call strikes, said Interactive Brokers Group equity options analyst Caitlin Duffy.
Call buyers enjoy profits if Standard Pacific's shares rally at least another 25 percent from the current price to surpass the break-even point at $5.20 by March expiration.
The bullish action comes one day before Standard Pacific is due to release quarterly results and after homebuilder D.R. Horton Inc (DHI.N) on Tuesday posted its first quarterly profit in almost three years.
D.R. Horton shares jumped 10.5 percent to $13.16. The rally in home builder stocks, driven by pending home sales and D.R. Horton results, pushed the Dow Jones home construction index .DJUSHB up more than 6 percent.
Pending sales of existing U.S. homes edged up as expected in December, the National Association of Realtors said Tuesday. Still, home vacancies rose in the fourth quarter, pointing to a slow recovery for the housing market.
IQR take: it's not unusual for SPF to move 25% up or down after an event, or for no reason. We took a bullish stand recently, and our article yesterday stated our reasoning. After today's runup, it'll take a really great earnings report this quarter to go up 20% or so from here. The company is well positioned. Orange County's housing market is now probably a seller's market. Its median price has gone up the most in SoCal in recent months. Can the company take advantage of its cash and geographical position? We'll have to see tomorrow. Looks like the option traders agree with our bullish stance.
Standard Pacific Corp. (SPF : 4.18, -0.05) – Options trading on single-family homebuilding company, Standard Pacific Corp., jumped through the roof this morning as investors exchanged 8,815 contracts on the stock in the first hour of trading. The current volume represents nearly 88% of the 10,033 contracts of total existing open interest on Standard Pacific. Shares are trading 8.33% higher to $4.16 as of 10:28 am (EDT). Bullish players are buying out-of-the-money calls at the March $5 strike where roughly 5,000 contracts were coveted for an average premium of $0.20 apiece. Call-buyers enjoy profits if Standard's shares rally at least another 27% from the current price to surpass the breakeven point at $5.20 by expiration in March. The explosion in demand for options on the homebuilding firm pushed options implied volatility up 20.93% to 99.23%.
ReplyDelete(Source: http://www.istockanalyst.com/article/viewarticlepaged/articleid/3832245/pageid/2)
Looks like a difficult bet. These calls are likely to expire worthless in March.
ReplyDelete