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Options Tracker: Home Builders, Energy And Yahoo

Major homebuilders are down across the board today as Lennar faces fraud accusations from a self-described consumer group.

Lennar , KB Home, and Pulte Homes , and D.R. Horton are all down as LEN sees heavy options activity. About 41,000 puts traded in Lennar in the first 40 minutes of trading alone this morning, according to OptionMonster's tracking systems, which identify unusual options activity. We also saw unusually heavy put buying in some of these names two days ago.

Lennar is down much farther than the other homebuilders, falling more than 20 percent today while its competitors are down in the single digits. Earlier today a self-described consumer group called the Fraud Discovery Institute reportedly accused the company of "treating their joint ventures exactly like a Ponzi scheme." The allegations appear to be confined to Lennar.

    • KB Home Reports Loss, Says Market Could Worsen

Disclosures: I currently have no positions in these stocks.

Energy
A key energy sector ETF is down about 2.5 percent on the day as the price of crude slips below $40 for the first time this year, and options action is looking for more downside.

The XLE Energy SPDR exchange traded fund is down to about $49, more than 8 percent off of Tuesday's two-month high. The ETF has been bouncing between $40 and that high level of roughly $53.50 since early October. It had come down from above $90, which it had held until July.

OptionMonster's tracking systems shows buying of the February 46 puts, as more than 5,000 have traded in relatively small lots against open interest of 1,832. The puts are up $0.43 to $2.36.

The implied volatility for the XLE ticking up today at 51 percent but still below the historical volatility of 58. This trade is looking for the fund to be below 44 by expiration.

Yahoo
YHOO gapped up to open at 13.42 and has been falling since but at midday remains slightly higher than yesterday's close just above $13. The stock has been trending up since its 52-week low of $8.94 reached Nov. 20 but has been unable to break above a key resistance level around $13.50.

OptionMonster's Heat Seeker tracking system this morning showed buying of the February 12 puts, where 7,300 traded in one block for $1.08, was well above open interest of 1,894. Seconds later we saw the January 12.5 puts change hands, also in a block of 7,300, for $0.37. This trade, however, was against open interest of 22,376 and took place between the bid and the ask.

So what we have here is either a "diagonal spread," or a "roll." The roll would involve someone simply closing out long January puts and buying February puts to provide more time to make money on the downside. The diagonal spread involves the same buying of the February 12 puts and selling of the January 12.5 puts, but both are new opening positions.

The diagonal spread looks to take advantage of the greater time decay in the January options. The "theta" (the Greek term for the time decay) is .04 for those options and .02 for the February, meaning the January options are losing twice as much to time decay on a daily basis, all else held equal.

The calendar spread will make its maximum profit with the stock near the short strike at expiration. It will lose if the stock moves too far in either direction.

  • More Options Tips from Jon Najarian

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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.

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