Selling DHI puts for income.
D.R. Horton (DHI) builds homes across the U.S. with operations in 31 different states.
Demand for homes remains very strong despite high prices and rising mortgage rates.
As supply chain pressures ease, companies like DHI will be able to complete more homes, and develop new neighborhoods. This should lead to even higher profits.
Today we learned that mortgage applications to purchase a home rose by 8%. So demand is clearly still strong during this buying season.
Shares of homebuilder stocks (including DHI) have pulled back sharply as mortgage rates moved higher. DHI is now trading at roughly 4 times expected profits for next year.
That’s a tremendous value and shares are unlikely to trade much lower given the deep value for this stock.
By selling the August $62.50 puts near $4.10, we’re able to collect an annualized yield near 41%, while also giving us roughly $2.00 per share in cushion between the current market price for DHI and our strike price.
- Sell (to open) 1 DHI August 19th $62.50 put
- Limit: $4.10 or more
- The new position will represent roughly 7.3% of our model.
- 15:01 Executed
- Sold 1 DHI Aug 19th $62.50 Put @ $4.14