When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (DHI) – BUY
BUY the DH Horton (DHI) October 2024 $165-$175 vertical BULL CALL debit spread at $8.80 or best
Opening Trade
9-18-2024
expiration date: October 18, 2024
Portfolio weighting: 10%
Number of Contracts = 12 contracts
I believe that there is a major rotation in the market underway, out of technology stocks that have been leading all year into interest-sensitive stocks like new homebuilders.
If you can’t do options, buy the stock. My long-term target for (DHI) is $250, up 43%. If you want a less volatile position, you can buy the SPDR S&P Homebuilders ETF (XHB), a basket of stocks in the industry.
The Federal Reserve open market committee meets this week and is expected to raise interest rates for the first time in five years. That also invites a weaker US dollar and stronger foreign currencies, gold, and silver.
Therefore, I am buying the DH Horton (DHI) October 2024 $165-$175 vertical BULL CALL debit spread at $8.80 or best.
Don’t pay more than $9.40 or you will be chasing. Don’t enter market orders under any circumstances. Just enter a range of limit orders and work them.
The bull case for homebuilders is very simple. They are catching on fire, with the prospect of falling interest rates. The US has a structural shortage of 10 million homes with 5 million Millennial buyers. Homebuilders have been underbuilding since the 2008 Great Financial Crisis, seeking to emphasize profits and share buybacks over development land purchases.
Buy (DHI), (LEN), (PMH), (KBH) on any dips. (DHI) is the largest of these with a market capitalization of $63.5 billion.
For details about DH Horton, please visit their site at https://www.drhorton.com.
This is a bet that the (DHI) will not fall below $175.00 by the October 18 option expiration in 22 trading days.
Here are the specific trades you need to execute this position:
Buy 12 October 2024 (DHI) $165 calls at………….………$31.00
Sell short 12 October 2024 (DHI) $175 calls at…….……$22.20
Net Cost:………………………................……..………….….....$8.80
Potential Profit: $10.00 - $8.80 = $1.20
(12 X 100 X $1.20) = $1,440 or 13.64% in 22 trading days.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep-in-the-money spread trades can be enormous.
Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
