Go Full Bull Before the Home Sales Report

by Ken Trester | November 27, 2012 8:10 am

With the buzz around improvements in the homebuilding sector thanks to double-digit earnings surprises from the likes of Ryland Homes (NYSE:RYL[1]) and PulteGroup (NYSE:PHM[2]) and a triple-digit ­earnings surprise from KB Homes (NYSE:KBH[3]), the new home sales report — due out at 10 a.m. Wednesday — should illuminate whether that momentum will keep going.

Consensus is for continued progress in the homebuilding[4] sector, and my proprietary software shows a bullish options trade in a home improvement products and building materials leader, Masco (NYSE:MAS[5]).

The Michigan-based company plays in the space with a variety of different offerings, namely cabinetry, plumbing products, installation and other services (garage doors, fireplaces and insulation), decorative architectural products (paint, windows and door fixtures, etc.) and other specialty products (windows and doors and fastening units like staple guns).

With such a wide product set, it’s easy to see why any uptick in new home building — and even existing home sales — would give MAS a boost. Use the following call option to get in front of it:

Buy the MAS Jan 17.50 Call options at 60 cents or lower.

After entry, take profits off the table if the stock price hits $18.10 or the option reaches our target of $1.40. It’s important to know your exit strategy ahead of time, so cut and run if the stock price closes below $15.80 or the options price dips to 40 cents.

Ken Trester[6] is editor of the popular Maximum Options[7] program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

Endnotes:
  1. RYL: http://studio-5.financialcontent.com/investplace/quote?Symbol=RYL
  2. PHM: http://studio-5.financialcontent.com/investplace/quote?Symbol=PHM
  3. KBH: http://studio-5.financialcontent.com/investplace/quote?Symbol=KBH
  4. continued progress in the homebuilding: http://investorplace.com/247trader/trade-of-the-day-lennar-len/
  5. MAS: http://studio-5.financialcontent.com/investplace/quote?Symbol=MAS
  6. Ken Trester: http://investorplace.com/2011/06/author/Ken-Trester/
  7. Maximum Options: https://order.investorplace.com/index.jsp?sid=WRC177&uid=208.250.100.2-1292420591507798

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