Market Overview

Large Option Trader Selling The Beazer Homes Rally

Large Option Trader Selling The Beazer Homes Rally

Beazer Homes USA, Inc. (NYSE: BZH) shares spiked higher by 7 percent on Monday, but one large option trader made a big bearish bet on the thinly traded stock.

The Trade

On Monday morning, Benzinga Pro subscribers received an option alert related to Beazer.

The seller dumped 1,687 Beazer call options at an $11 strike price that expire on Nov. 15. The calls were sold at the bid price of 95 cents and represent a $160,265 bearish bet. Prior to the large trade, the open interest for the November Beazer $11 calls was only three contracts.

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Even traders that focus exclusively on stocks watch the options market closely to gain insight into what options traders may be thinking. Due to the relative complexity of options trading, options traders are often seen as more advanced than the typical stock trader. Many of these options traders are institutions or wealthy individuals that pay have a unique take on a company.

Housing Market Downturn?

After rallying more than 45 percent year to date through early May, Beazer shares have tanked 24.2 percent this month. Rumors of a potential buyout may have contributed to Beazer’s early 2019 run, and Monday’s option trader may be throwing in the towel on the buyout speculation.

At the same time, the trader may also be betting that market jitters and a ramping trade war could weigh on the U.S. economy and the housing market. If homebuyers get nervous, Beazer’s bottom line could take a hit.

Unfortunately, it’s impossible to be 100 percent certain if an option trade is a hedge or not. Stockholders often use call options to hedge against a larger bearish stock position. Given the Beazer option trade’s relatively small size, it’s unlikely to be a hedge in this case.

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