Carter Worth And Mike Khouw's D. R. Horton Trade

On CNBC's "Options Action," Carter Worth spoke about D. R. Horton Inc DHI. He showed its chart, along with the chart of iShares Dow Jones US Home Const. (ETF) ITB and concluded there might be a pull back ahead.

Worth explained that iShares Dow Jones US Home Const. (ETF), broke out to the upside recently, but relative to the S&P 500, it stayed at the same level. D. R. Horton and iShares Dow Jones US Home Const.(ETF) are trading well above their 150-day moving average and they are due to a pull back to the trend, said Worth. He would take profits in D. R. Horton.

Mike Khouw suggested that options traders should sell the January 48/50 call spread in D. R. Horton for a credit of $0.80. If the stock stays below $48, he is going to collect the whole premium. He is going to lose money, if the stock closes above $48.80 at the January expiration and he can lose a maximum of $1.20.