The Trade: buy 1 PHM November $28 call for $0.70.
PulteGroup, Inc. (PHM) is a leading homebuilder in the U.S., operating under the names of Centex, Pulte Homes, Del Webb, John Weiland Homes, and DiVosta Homes. PHM has been in business since 1950.
Pulte will report its quarterly earnings on Oct. 24. Analysts are projecting $0.59/share for the quarter that ended at the end of September, a 60% year-over-year increase in earnings. For this year, $2.07/share is the consensus earnings projection, and $2.69/share is the forecast for 2018.
PHM trades at a trailing PE of 15 and a forward PE of a mere 10.
Despite excellent earnings growth projections by PHM analysts, almost 7% of PHM's float is held as short the stock.
Technically, PHM is in breakout mode, now trading at 10-year highs. The stock has one-year stochastic and Relative Strength Index patterns that I read as strongly bullish.
The trade tactic I prefer now for PHM is the bullishly biased, out-of-the-money long call shooter expiring in November. This is a very high-risk trade that should only be opened using highly discretionary capital.
The trade is as follows:
-- Buy 1 PHM November $28 call for $0.70.
The suggested target to close for a gain is a bid of $1.20 and the suggested target to stop out the trade is a bid of $0.20. Best to scale into the position using limit orders.
At the time of publication, Skip Raschke held no positions in the stocks or issues mentioned. Please be advised that shorting stocks or doing options trades can entail increased risks and might not be suitable for all investors. Consult your financial adviser for details.