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Housing bulls pile into MDC

Daniel Acker | Bloomberg | Getty Images

Housing stocks have been trying to rebound in the last week, and yesterday the bulls piled into home builder MDC Holdings.

OptionMonster's tracking systems detected upside option activity in the October 30 calls, where nearly 2,700 contracts traded for $1.15 to $1.75. The volume was well above the strike's previous open interest of 417 contracts, indicating that new positions were established.

These calls lock in the price where shares can be purchased, letting investors benefit from gains in MDC for much less capital than buying the stock directly. The options can also provide significant leverage in a rally, but they will expire worthless if shares remain below $30 through mid-October.

MDC rose 2.36 percent to $29.97 yesterday, heading back toward its 50-day moving average after a three-month selloff between June and August. Other homebuilders and related names have seen bullish option action this week, including KB Home, Lowe's, and Mohawk Industries.

Total option volume in MDC was five times greater than average yesterday, with calls outnumbering puts by 26 to 1.

—By CNBC Contributor Mike Yamamoto

Additional News: Homebuilders buoyed by buyers

Additional Views: Most home builders are 'not investable' right now: Pros

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Options Trading School:

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Disclosures:

Mike Yamamoto is managing editor for OptionMonster. Yamamoto has no positions in MDC.

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