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Options Action

Trader makes $1 million bet that homebuilders will continue to rally


Options Action: Bet on homebuilders?

The homebuilders are surging this year, and one trader is making a big bet that the rally will rage on.

According to the Commerce Department, new home sales in the U.S. are up 6 percent since January, the highest level since July of 2016, and that has homebuilders reaping the benefits.

The home construction ETF, ITB, is up 15 percent this year and hit a 52-week high last Friday, and the overall sentiment in the options pits continues to be bullish. "ITB saw six times the average daily call volume [during Wednesday's session]," Mike Khouw of Optimize Advisors told CNBC's "Fast Money" on Wednesday.

One trade in particular that caught his eye was a $1 million bet that the ETF will surge more than 20 percent through the end of the year. Specifically that trader bought 24,000 Jan. 18 38-calls for 60 cents per options contract.

"[This is] a substantially bullish bet … volatility is low, therefore options are cheap," Khouw added.

The ITB was trading slightly higher in the $31.70 range during Thursday's session.