Lennar Stock Surges After Reporting Blowout Earnings

The equity currently sports attractively priced options

Digital Content Manager
Dec 17, 2020 at 10:45 AM
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The shares of Lennar Corporation (NYSE:LEN) are up 8.7% at $80.74 this morning, after the company reported better-than-expected fiscal fourth-quarter earnings, as well as a revenue beat. The home construction concern attributed the upbeat results to reined in construction costs, as well as a strong U.S. housing market, which got a boost from low mortgage rates and a surge in suburban housing demand during the COVID-19 pandemic.

Digging deeper, Lennar stock has been carving a channel of higher highs over the past several months, leading to an Oct. 16 record high of $86.79, which is more than triple its March 18, eight-year low of $25.42. And while the stock had been cooling off since that peak, it has now broken through overhead pressure at the $78 level, with support from the 150-day moving average. Longer term, LEN sports a 43.6% year-to-date lead.

Analysts were already optimistic toward the security coming into today, with 10 of the 16 in coverage sporting a "buy" or better rating, and the remaining six a tepid "hold." Plus, the stock's 12-month consensus target of $89.67 is a 11.9% premium to current levels.   

Drilling down to today's options activity, more than 7,000 calls have already crossed the tape in just the first half hour of trading, which is 11 times the average intraday amount. Most popular is the weekly 12/24 81 strike-call, followed by the December 80 call, with new positions currently being opened at the former. 

Now could be an opportune time to take advantage of the security's next move with options. The stock's Schaeffer's Volatility Index (SVI) of 46% sits in the relatively low 19th percentile of its annual range. This means LEN currently sports attractively priced premiums.

Plus, the equity's Schaeffer's Volatility Scorecard (SVS) sits at 84 out of 100. This means Lennar stock has greatly exceeded option traders' volatility expectations during the past year -- a boon for options buyers.

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