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Mike Khouw Sees Unusual Options Activity In Beazer Homes

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On CNBC's Fast Money, Mike Khouw said that he noticed unusually high put options volume in Beazer Homes USA, Inc. (NYSE: BZH) as 9 times average daily put volume was traded.

There was a large trade on Thursday that caught his attention. A trader bought 3,000 contracts of the January 2017 10 strike puts for $1.23. The breakeven for this trade is at $8.77 or down 50 percent from the current price of Beazer Homes.

To analyze the rationale behind this trade, Khouw showed a bonds chart for Beazer Homes. In July, the company missed on earnings results and both stock and bonds traded sharply lower. Currently the bonds are yielding 7.5 percent and it costs approximately 5.5 percent to hedge the risk of the stock trading to zero over the next two years. Khouw believes that the trader is actually hedging long bonds position.

 

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