LEN Unusual Option Activity Report
Homebuilders like Lennar Corp (NYSE: LEN) are seeing a strong bid on News of the Biden administration’s proposed $15,000 tax credit for new home buyers. As homebuilding stocks are rising on Wednesday, option traders found opportunity in LEN as it outperformed with over a 6% gain at the time of this writing.
Clearly, the intent of the credit is to help first-time homebuyers afford a home in an overheating market. Whether this allows the home price rally to continue is anyone’s guess, but the proposal is creating near-term buying interest and the option activity on LEN helps to quantify that opportunity.
LEN Option Activity
The call option volume on LEN is over 10 times the 5-day average. Also, over 70% of the call volume got filled at the ask price. Those details doesn’t exactly give a great indication of the bullish interest, other than the fact high call volume like that is typically buying. Here’s a breakdown of the significant option activity:
- 6,720 19 MAR 21 $85 calls BOT in two prints @ $3.63 to $3.65 against open interest of 8
- 6,720 19 MAR 21 $90 calls sold in two prints @ $2.05 to $2.06 against open interest of 5
The above activity was a long call vertical that cost around $1.68 to $1.69. The notional value of this trade at 6,720 contracts is $1.13 million and a breakeven price of $86.69. The trade reaches max gain above $90 by the March 19 expiration. This is one of the features of unusual option activity, it can provide a target and timeframe of the trade being made.
LEN Techncials
Today’s movement in LEN is pushing the price through its upper trendline. That trendline is part of a larger symmetrical triangle pattern that goes back to the October 16, 2020 high.
Symmetrical triangles have a measured move from the initial high to the next low. The high on October 16 is near $85 and the next low was on October 30 near $70. The target is based on the $15 measured move added to the breakout level near $81. That gives a price target of $96.
Conclusion
Homebuilders are seeing a resurgence today on the housing news and LEN has been a beneficiary. This trend has been building for a few weeks since its attempted breakout on December 17, 2020. Today’s activity dovetails with the technical pattern that is forming on the stock and is arriving at a similar target and a similar timeframe. This type of confluence is something that help provide more conviction in the stock’s potential movement.
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