On Friday’s Options Action, the crew analyzed the performance of homebuilder stocks. Homebuilders have underperformed the market over the past few months and have started to look oversold. Toll Brothers (TOL) has entered its 7th straight month of declines and underperformed homebuilders by almost 3 fold. Coupled with price action near its previous support levels and oversold conditions, suggests a reversal higher. Expecting TOL to jump higher, Michael Khouw suggests buying a Sept 38/42 Call Vertical for a $1.20 Debit. As of Friday’s close, this option is trading at $1.25.
We’ve structured this trade in OptionsPlay so you can analyze and view this trade along with the supporting technical chart at your convenience. You can also view the Options Action’s video by clicking on the following link: TOL Options Action