Options Bears Pile On for PulteGroup Earnings

Meanwhile, sector peer D.R. Horton reports on Wednesday

Jan 29, 2018 at 2:42 PM
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PulteGroup, Inc. (NYSE:PHM) reports fourth-quarter earnings before the open tomorrow, and near-term options traders are unusually put-skewed before the event. For instance, our Schaeffer's put/call open interest ratio (SOIR) for PHM comes in at 1.35 and ranks only 2 percentage points from a 12-month high. Looking closer, recent activity has centered at the weekly 2/2 35-strike put, where speculators have been initiating options to bet on the security's next leg lower.

Low Expectations Not New For PHM

This proclivity for puts is continuing today. Roughly 8,000 puts have traded so far, easily outpacing the daily average of 1,055. There's been big spread activity in the weekly 2/2 series involving the 26.50-, 31.00, and 31.50-strike calls, suggesting bears could be anticipating a move down to $26.50 for PulteGroup shares by expiration at this Friday's close.

Such a move would put the homebuilder stock below the 200-day moving average for the first time in well over a year. So far today, the equity is trading 2.5% lower at $33.67 to test the 50-day moving average, after mortgage rates jumped to a four-year high. Nevertheless, PHM remains up 58% year-over-year gain, and hit a nearly 10-year peak of $35.21 last Tuesday.

phm stock price

Looking back, the security has moved higher the day after earnings in three of the past four quarters, including a 3.6% uptick last January. Analysts still don't have high hopes, though. Nine of the 15 covering brokerages say PHM is a "hold" or "strong sell," and the average 12-month price target of $35.41 sits right above current levels.

Sector Peer DHI In the Earnings Spotlight, Too

Meanwhile, fellow homebuilder D. R. Horton Inc (NYSE:DHI) will report earnings Wednesday morning. Today, DHI shares are trading in line with their sector peer, last seen down 3.3% at $48.70, and puts are trading at three times the pace expected today. Following the company's January earnings release last year, the shares jumped 6.6% in one day.


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