Homebuilding Stock With the Tools to Surge Higher

There's plenty of room for upgrades among the brokerage bunch

Apr 21, 2021 at 3:04 PM
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Homebuilding giant Lennar Corporation (NYSE:LEN) has been on a steady uptrend since early March. Now, the stock is just above the round $100 level, or four times its pandemic bottom. This also represents a 50% premium from its 2005 peak; an unsurprising continuation of optimism considering the company’s bullish earnings move a few months back. With this level of support in place, now is the perfect time to buy calls on LEN.

In terms of analyst sentiment, there looks to be plenty of room for improvement. Heading into Friday’s trading, seven of the 15 covering brokerage firms sport a tepid "hold" recommendation, meaning there is plenty of room for upgrades, should these bearish bets begin to unwind.
Looking toward options, a slew of the 100-strike calls expired this past week, leaving opportunity for support from the May 100-strike puts in the coming weeks. Lastly, now looks like a good time to weigh in with these options. The stock's Schaeffer's Volatility Index (SVI) of 30% lowest annual percentile of readings, implying that options players are pricing in low volatility expectations at the moment. Our call recommendation has a leverage ratio of 6.2 and will double in value on a 15.8% jump in the underlying equity.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this LEN commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading serv


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