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Shares of the home construction company are down nearly 4%, but at least one investor sold puts in a moderately bullish play.
Karla hosts and produces Options News and Mad About Options, and writes the Sidewinder report. Karla graduated from Colgate University, where she majored in English and Film and Media Studies. November 20, 2009 3:03 EST
KB Home (KBH) has not announced notable news all week, but at least one investor could be interpreting that as a good reason to sell puts and calls for minimal movement in the stock throughout the next month.
More than 18,000 at-the-money December 14 puts have traded so far today versus open interest of just 551 contracts, indicating investors traded these options to open. Around 10:45 a.m. EST, we saw two blocks totaling 13,000 contracts trade for 90 cents each (the bid price). These puts are currently trading up 15 cents with a 45-delta. The options are down more than the delta would suggest, meaning the majority of this action happened on the sell side.
Today’s selling action has brought implied volatility of the December 14-strike calls down to 55.
Though investors should not interpret call selling as a reason to empty their stash of KBH shares, it’s interesting that the market expects volatility to continue coming in. The options-selling action we’re seeing in the homebuilders is lowering implied volatility as investors are betting that names such as KBH won’t see much movement going into the holidays, despite the housing data coming up next week.
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