KB Home is up nearly 6 percent along with heavy options activity, as traders may be thinking that housing prices are finally hitting bottom.
The homebuilder has averaged volume of just over 3,000 calls a day in the last two weeks but traded more than 10,500 contracts in the first hour of the session Tuesday morning. The bulk of the trade was a large bull call spread, in which the buyer grabbed about 3,000 June 15 calls and sold about 5,000 of the June 17.50 calls for a net of $1.10.
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KBH stock is up 5.94 percent to $15.51 in afternoon trading, as of this writing. Just last week the shares were flirting with $17.
The call activity followed the Case-Shiller Home Price Index, which showed that single-family housing prices fell 18.7 percent in March from the same period a year ago. As bad as that number looks on the surface, the report also showed that the pace of decline had slowed for the second straight month.
I'm long stock and options in KBH.
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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.