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None BZH None
  RYL  

New Calls

None today.
 

New Puts

Beazer Homes - BZH - close: 34.20 chg: -1.77 stop: 37.55

Company Description:
Beazer Homes USA, Inc., headquartered in Atlanta, is one of the country's ten largest single-family homebuilders. (source: company press release or website)

Why We Like It:
We are heading into spring, which is usually the start for prime time home buying season. Yet the homebuilders are breaking down. This widespread weakness in the sub prime lenders has infected the builders. The market is worried that an industry-wide tightening of the country's lending practices is going to spell fewer sales for the homebuilders. We are adding both BZH and RYL to the play list. We suggest you only pick on to limit your exposure should the group turn around. We like BZH because shares are breaking down under support near $35.00 and breaking down from a short-term consolidation pattern. Our target is the $30.50-30.00 range. FYI: More conservative traders may want to use a tighter stop loss. Traders should note that BZH does have a relatively high amount of short interest (17% of the float) and that does raise the risk of a short squeeze.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 35.00 BZH-PG open interest=4785 current ask $2.30
BUY PUT APR 30.00 BZH-PF open interest= 490 current ask $0.55

Picked on March 12 at $ 34.20
Change since picked: + 0.00
Earnings Date 04/26/07 (unconfirmed)
Average Daily Volume = 1.2 million

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Ryland Group - RYL - close: 45.31 chg: -1.49 stop: 48.27

Company Description:
With headquarters in Southern California, Ryland is one of the nation's largest homebuilders and a leading mortgage-finance company. The company currently operates in 28 markets across the country and has built more than 265,000 homes and financed more than 225,000 mortgages since its founding in 1967. (source: company press release or website)

Why We Like It:
RYL is another homebuilder that is suffering as investors fear that the trend of tighter and tighter lending practices will hit sales of homebuilders. The recent oversold bounce from $45.00 has already failed and the stock looks poised to breakdown under support. We're suggesting a trigger to buy puts at $44.75. If triggered our target is the $40.50-40.00 range. We do have a wide stop just above Friday's high. FYI: The P&F chart for RYL points to a $29 target. We suggest that readers only play one homebuilder since the group still looks oversold and might bounce. The stock does have a high amount of short interest at 24% of the float and that raises the risk of a short squeeze.

Suggested Options:
We are suggesting the April puts.

BUY PUT APR 50.00 RYL-PJ open interest= 9328 current ask $5.40
BUY PUT APR 47.50 RYL-PW open interest= 1280 current ask $3.60
BUY PUT APR 45.00 RYL-PI open interest=12875 current ask $2.20
BUY PUT APR 42.50 RYL-PV open interest= 2297 current ask $1.25
BUY PUT APR 40.00 RYL-PH open interest= 7039 current ask $0.70

Picked on March xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/25/07 (unconfirmed)
Average Daily Volume = 1.1 million
 

New Strangles

None today.
 

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