The PHLX Housing Sector Index (.HGX) is seeing five times its normal options trading volume. The housing sector is hot today after the latest housing starts data came in much better than expected. According to the Commerce Department, builders broke ground on new homes jumped to an annual rate of 1.066 million last month, which compares to consensus estimates of 960,000 and 975,000 during the month of May. Building permits, a better gauge of future activity, rose to an annual rate of 1.091 million, compared to economist forecasts of just 965,000. The numbers, which were released before the start of trading Thursday, might have been distorted due to a new construction code in New York. Nevertheless, the news lit a fire under the homebuilders. The PHLX Housing Sector Index is up 5.60 pionts or 5 percent to 112.70 and near session highs. In the options market, trading remains defensive, however, with 21,000 HGX puts and 1,700 calls trading on the day. Most of that volume seems part of a roll, where the strategist closed out 10,000 of the August 120s and bought a similar position in September 105s.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.