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Cofounder, OptionMonster.com
Upside option activity exploded in the XHB homebuilder exchange-traded fund when the market surged yesterday afternoon.
The SPDR S&P Homebuilders ETF [XHB
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] ended the session up 4.06 percent to $15.38 on more than double the average daily stock volume. The XHB is up 18 percent in the last three months.
Volume in the November 16 options ballooned to 126,799 calls, more than 17 times existing open interest at the strike. Most of the large trades priced for $0.25 to $0.30 in a strong buying pattern, according to OptionMonster's real-time tracking systems.
The bulk of the option activity was concentrated in a 10-minute interval in the afternoon when the market neared its peak for the session. The trades pushed overall options volume to almost 12 times greater than average for the XHB, whose main holdings are Lennar [LEN
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], Owens Corning [OC
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], and Williams-Sonoma [WSM
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].
For the calls to be profitable, the stock would need to rise roughly 6 percent or more before the options expire on Nov. 20. Overall calls at all XHB strikes outnumbered puts traded by more than 9 to 1.
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Options Trading School:
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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.
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Data is a real-time snapshot *Data is delayed at least 15 minutes