Best Stock on the Market

Put Spread on LEN on 4/26/2013

Lennar Corporation (LEN) is a homebuilder and a provider of financial services and through its Rialto Investments (Rialto) segment, an investor, and manager of funds that invest in real estate assets. The Company's homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land directly and through unconsolidated entities in which it has investments. Its homebuilding activities have five segments: Homebuilding East, Homebuilding Central, Homebuilding West, Homebuilding Southeast Florida, and Homebuilding Houston. It has two other segments: financial services and rialto. Its financial services reportable segment provides mortgage financing, title insurance and closing services for both buyers of its homes and others. Rialto segment focuses on real estate investments and asset management.
Stockwinners is bearish on this name for the following reasons:
  1. This is a housing recovery, not a housing boom. This name is clearly getting ahead of itself.
  2. Valuations for the entire sector still look very optimistic, essentially pricing in all the increased demand and operational improvement for a few years into the future.  LEN actually reported decent numbers back on March 20th, but that in fact marked a top for the stock.  That is one obvious sign that investors might have expectations that are too high.
    Interestingly, LEN has now rallied back to near that March top , as the whole sector has rallied this week.  The stock bounced off its 200 day ma last week, but might be tracing out a head and shoulders top here.

Trade

  • Buy 1 June $42.00 Put at $1.88
  • Sell 1 June $38.00 Put at $0.63
  • For a net debit of $1.25

Profit/Loss Analysis

  • Breakeven at $40.75
  • Maximum profit is $275.00 at strike of $38.00
  • Maximum loss is ($125.00) at strike of $42.00

Closing Summary

  • Sold 1 June $42.00 Put at $3.10
  • Bought 1 June $38.00 Put at $0.77

Position closed on 5/31/2013 at price of $2.33 with a 86.40% gain in 34 days.

Updates

5/31/2013 2:48:51 PM

We are going to take profits and close the LEN position. if you wish to stary short on this name , make sure to lock in some profits.

Trade: sell 1 June 42/38 put for less than 2.33

  • sell 1 June 42 Put for 3.1
  • Buy 1 June 38 Put for .77
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