I'm still seeing activity in the Mar 12 calls. On Friday $XHB and the Mar 12 calls rallied on strong volume (
blog post). Today XHB lost 8% and the Mar 12 calls lost half its value when people sold the Geithner proposal news. It looks housing and toxic mortgages are the main focus of Obama's stimulus plan which probably explains the continued interest in the options of the S&P homebuilders ETF. People must be building some interesting positions to play the reaction. I'm not quite sure what the exact logic is behind the volume but you can see there were 53,753 Mar 12 calls open at Monday's close and 50,030 traded today. I'm wondering who is taking each side of the trade here and how much is being
hedged, but it would still be interesting to see 100k Mar 12 calls open tomorrow. The charts below look interesting too. It looks like the big volume came in at the end of the day when premium stood around 0.40. Friday's volume spiked at around 0.70 - 0.77. Looking at the XHB chart specifically you can see that it failed to break the 50 day moving average and is now going to test its uptrend. Judgement day is coming soon for XHB! Also read the article below about the National Association of Realtors thoughts on the stimulus.
"WASHINGTON, DC - The National Association of Realtors® hailed the Senate for passing its stimulus bill that expands the homebuyer tax credit, an important housing component that will help shrink housing inventory, bring stability to home values and move the country closer to an economic recovery."
"About the tax credit, McMillan said, "The credit of up to $15,000 for homebuyers is a critical provision in the Senate bill that will result in approximately 1 million additional home purchases this year," McMillan said." (Market Wire via MSNBC)
XHB March 12 Call (Monthly) (Source: Optionsxpress)
XHB March 12 Call (5 Day) (Source: Optionsxpress)
XHB March 12 Call Option Chain (Source: Yahoo Finance)
XHB Chart (Source: Stockcharts.com)
