LEN – Lennar Corp. – From time-to-time in the world of options we get bamboozled by the motivation driving some investors in their options activity. Here’s one of those examples. Shares in the homebuilder are down by 1% at $13.50 having breached a July 1 low at $13.30 earlier in the day. The next stop would appear to be a dip to the 52-week low at above $11.50. The increased uncertainty is also indicated by a nudge higher close to 50% in the options implied volatility at Lennar. The major batch of options appearing today is in the January 2012 expiration where 16,000 call options were sold at $5.05. This makes little sense to us. It could be a covered call, but the calls are deeply intrinsic. A naked premium-write would be far better off selling an out-of-the-money call option unless he has ambitions to deliver stock to a buyer at $10.00 a piece, yet the stock would by definition currently be un-owned. This one has us stumped.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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