Dan Nathan's Housing Trade

Speaking on CNBC's Options Action, Dan Nathan talked about a trading idea from June 20.

Back then, he suggested a short position in SPDR S&P Homebuilders ETF XHB, which involved buying a longer date put and shorting a shorter date put option with the same strike at $31.

This idea was profitable as the shorter date put expired worthless, and he managed to double his money on the longer term put when the stock fell close to $29.

He said that he is getting close to set up the same trade again. He explained that this is the mean reversion trade, and the stock is trading now at a half of its 6-month range, close to its 200-day moving average.

Carter Worth commented that from the technical viewpoint, those who didn't act when the stock broke lower will probably see this recent move higher as a gift and sell the stock. He added that the group hasn't really improved with a move in The Home Depot HD, which had a really good week.