Construction Stock Faces Multiple Headwinds

The stock is seeing attractively priced premiums right now

Feb 21, 2023 at 10:26 AM

The shares of D R Horton Inc (NYSE:DHI) recently failed to conquer the +10% year-to-date level and the $100 region, and broke below a trend that lasted from November to February. What’s more, the stock could fill a gap around the $78-$80 area, and is breaking below peak put open interest, which could create a delta hedge and push prices toward the 80- and 85-strikes. With this in mind, we are initiating a short position on DHI.

Analysts still lean firmly bullish on D. R. Horton stock, with 13 still calling the security a “buy” or better, while the remaining nine say “hold” or worse. This leaves ample room for downgrades moving forward.

Options look like a good way to go when weighing in on DHI. The stock is seeing attractively priced premiums right now, per its Schaeffer's Volatility Scorecard Index (SVI) that sits in the low 10th percentile of its annual range.

Our recommended put has a leverage ratio of -6.18, and will double in value on a 13.9% drop in the underlying shares.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this DHI 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 services.

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