Either way, the comments we are most interested in will be forward-looking considering the recent changes to the yield environment. KBH has just broken a head-and-shoulders reversal pattern, with a downside price target at $17 per share. Investors will be looking for reasons to sell. The earnings report could easily facilitate that move, but we want to have enough time before expiration to be flexible about when we exit just in case momentum looks likely to push the stock to $15, which would be roughly where we expect long-term support to kick in.
Recommendation: Buy to open the KBH August 18 Puts (KBH130817P00018000) for a maximum price of $1.50.
Click here to receive the Trade of the Day in your inbox every day.
InvestorPlace advisors John Jagerson and S. Wade Hansen are co-founders of LearningMarkets.com, as well as the co-editors of SlingShot Trader, a trading service designed to help you make options profits by trading the news. Get in on the next trade and get 1 free month today by clicking here.