Be Savvy: Play the Homebuilders

Sure, Toll Brothers posted another quarterly loss. But there are homebuilder strategies for savvy investors, says Randy Frederick. The director of derivatives at Charles Schwab gave his take on the sector now.

Frederick noted that options activity for Hovanian indicates stronger interest than stock buys would indicate.

"Even though we really haven't seen recovery in the housing market and the data suggest that a bottom is nowhere near...the whole housing sector overall is up 40 percent over the last couple of months," he says.

While there are more losses ahead for the sector, "those who can sustain those losses will do OK."

Frederick likes a sector-index ETF, SPDR S&P Homebuilders .

And he sees a way to play Lennar and KB Home than can rake in "15 to 20 percent." Watch the Video for his LEN/KBH Strategy.


Disclosure information was not available for Randy Frederick or his company.