Post-Earnings Dip Doesn't Deter Toll Brothers Inc (TOL) Bulls

Toll Brothers Inc missed Wall Street's fiscal fourth-quarter earnings estimate

Digital Content Group

Dec 10, 2014 at 1:28 PM

Toll Brothers Inc (NYSE:TOL) didn't fare well in the session after its September trip to the earnings confessional -- during which the shares lost 4.7% -- and things are no different today. Currently, the homebuilder's stock is down 4.6% at $33.19, following a fiscal fourth-quarter earnings miss. Nevertheless, options traders are rolling the dice on a rebound over the next several weeks.

Diving right in, calls are crossing the tape at a pace 2.5 times the expected intraday average, and outweigh puts by a healthy margin. Stealing the show is TOL's January 2015 36-strike call, where 2,313 contracts are on the tape. Nine-tenths have been exchanged at the ask price, volume tops open interest, and data from the International Securities Exchange (ISE) confirms some buy-to-open activity. In other words, these bullish bettors think the shares will topple $36 by January options expiration, roughly five weeks from now.

Looking at the charts, Toll Brothers Inc (NYSE:TOL) hasn't explored the north side of $36 since late July, and is sitting on a year-to-date deficit of more than 10%. As such, delta on the 36-strike call is a slim 0.15, signifying a 15% chance the contract will be in the money at expiration.

Follow @Schaeffers

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released!