Weekend Trader

Weekend Trader Series

March 5, 2023

Open Positions Update

  • Close the Twilio (TWLO) April 21, 2023, 80-strike put on Monday, March 6. Close the position at a limit price within the range of the current market price when you place the order.

The following is this week's recommendation:

 PulteGroup (PHM)

Place a limit order to buy the PulteGroup (PHM) July 21, 2023 50-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, March 3, this option was offered at $8.10. PHM closed at $55.19 on Friday, March 3.

Do not attempt to enter this position after Monday's close.

Please use the following guidelines to manage the position:
  • Exit the position if the option is at a 100% gain from your entry price.
  • If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, April 3, close the position.
  • If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
The shares of homebuilder PulteGroup (PHM) are pulling back to the historically bullish 40-day moving average, with similar moves in the past three years preceding gains of nearly 10% during the next month in 80% of the circumstances.

The equity also broke out above a short-term trendline connecting lower highs since its late-January quarterly report, which led to bull gap. The stock’s recent lows are above the close that preceded that gap higher.

The brokerage bunch is not overly optimistic, with seven of the 16 analysts in question calling PulteGroup stock a "hold," leaving ample room for upgrades. It’s also worth noting short sellers have been in covering mode since early November, and the 7.85 million shares sold short now make up for nearly four days’ worth of pent-up buying power.

There’s been heavy put open interest (OI) buildup, with three puts exchanged for every call. A lot of this is occurring at potential support areas such as the April 40- and 50-strikes, as well as the 55-strike in the upcoming standard March series.

Our recommended July 50-strike call has a leverage ratio of 5.1, and will double in value on a 19.9% rise in the underlying shares.

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