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Options Loving Home Builder's Stock

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.

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.

Investor Spring Cleaning - A CNBC Special Report
Investor Spring Cleaning - A CNBC Special Report

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.

Disclosures:

I'm long stock and options in KBH.

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Options Education:

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Top Home Builders:

DR Horton

Toll Brothers

Centex

Pulte Homes

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

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