DailyPlay – Opening Trade (DHI) – September 18, 2024

DHI Bullish Opening Trade Signal

Investment Rationale

The Federal Reserve is poised to cut interest rates today for the first time in four years. This policy shift could significantly impact market dynamics across various sectors, but none more so than the housing industry. Lower rates reduce borrowing costs, making mortgages more affordable and potentially boosting home demand. For example, the average 30-year mortgage rate dropped to 6.2% last week, its lowest in 18 months, down from nearly 7.8%, according to Freddie Mac.

For today’s trade in DHI, industry professionals might refer to it as a Combo or Risk Reversal strategy, but we call it the “FOMO Strategy” (Fear of Missing Out). We prefer to implement this strategy in a potential “buy the rumor, sell the news” scenario, which we fear might be the case with the housing sector in general.

DHI – Daily

Trade Details

Strategy Details

Strategy: Risk Reversal (Short Put and Long Call)

Direction: Bullish

Details: Buy to Open 1 DHI Oct 4 $182.5/$207.5 Put/Call Risk Reversal @ $7.00 net Credit per Contract.

Total Risk: This trade has a maximum risk of $18,243. It is typically executed on a cash-secured basis, meaning you would be willing to buy 100 shares of DHI at the put strike price of $182.50 (100 x 182.50 = $18,250) and then subtract the net credit of $7, resulting in a maximum risk of $18,243.

Trend Continuation Signal: A bullish but nervous trade on a stock that has broken out of its trading range with strong momentum but could be in a potential “buy the rumor, sell the news” scenario.

1M/6M Trends: Bullish/Bullish

Relative Strength: 9/10

OptionsPlay Score: 250

Stop Loss: N/A

View DHI Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

PLEASE NOTE that these prices are based on Tuesday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View DHI Trade