Action continues in SPDR Homebuilders ETF (XHB) — see 1:17 color. The focus now is on the Aug 15 – 16 call spread. The 15s have traded 24363X and the 16s, a total of 31,499. The top trade is a spread, apparently sold at 48 cents, 8372X on ISE. ISEE data indicate that half are opening customer buyers and this likely rolls a position opened on July 19 (Link – Premium Story) when more than 40K Aug 15 calls traded. If so, the strategist is collecting a hefty 40-cent per contract profit (roughly) on the 15s and now opening a similar position in the 16s at 24 cents each. It’s a short-term play because August options expire in 18 days.

SPDR Homebuilders Trust (XHB) edges up 3 pennies to $15.45 and a block of 10K Sep 16 calls is bought at 64 cents. It was tied to 430K shares at $15.40, according to a source on the floor. The same contract saw interest Friday and the action created 15,171 in new open interest. Today’s activity is likely to add to that interest, which is now 18K because Friday’s activity also included a buyer of 10K, but at 45 cents. New home sales data due out in five minutes.

Bearish activity detected in the SPDR Homebuilders Trust (XHB) after today’s New Home Sales data showed a 33 percent drop to record lows in May. XHB is showing some resilience despite two days of bleak housing numbers (Data Tuesday showed Existing Home Sales falling last month.) Shares are up 3 centrs to $15.26. Options action includes 17.3K puts, or 2X the recent average daily. Players are focused on Sep 15, Aug 15, and Aug 16 put options. Implied volatility is up about 5 percent to 36 (compared to a 52-week high and low of 53.5 and 24.)

Another day of heavy trading in the ETF and index world. In the SPYders, more than 4 million contracts traded (67 percent on the put side of the options chain.) 1.5 million contracts trade on the PowerShares QQQ (QQQQ) and almost 1 million in the Select Sector Financials (XLF). Russell 2000 (.RUT), Dow Jones DIAMONDS (DIA), Nasdaq 100 Index (.NDX), Powershares Bullish Dollar Fund (UUP), and SPDR Homebuilders (XHB) are also seeing 2X or more the recent average daily volume. On a related note, yesterday was a record day for the options industry, with 30,818,984 contracts traded, according to an OCC press release.

CBOE Volatility Index (.VIX) is up .09 to 21.46 and not far from session highs. VIX saw a spike at 10:00 after the latest home sales numbers fell well short of economist estimates. Sales declined by 11 percent to a record low annual rate of 309,000 in January, down from 348,000 in December and significantly worse than the 354,000 expected. Homebuilders (XHB) buckled on the news and trading has turned mixed. About 300 S&P 500 stocks are above water, 185 lower, and the SPX is up two points. Meanwhile, trading in the VIX pits is quiet. The top trade is a buyer of 1000 April 24 puts at $2.85. 8000 calls and 1700 puts traded on the volatility index so far.

The homebuilders are seeing relative strength and options action Thursday morning after Lennar (LEN) reported a surprise 19-cent profit. Analysts were expecting a loss. SPDR Homebuilders Trust (XHB) is up 47 cents to $15.98 and XHB Jan 16, Feb 17, Mar 16 calls seeing interest. Also seeing some action in LEN Jan 14 calls, Jan 12 puts; DHI Jan 12.5 calls, Feb 12 calls, and May 10 puts; and BZH Jan 5 puts and calls.

SPDR Homebuilder Trust (XHB) is up 44 cents to $15.22 and calls are active ahead of existing home sales data, due out Friday morning at 10:00 ET. One player bought an impressive 100K Nov 16 calls for an average of 30 cents per contract. 117,000 now traded.

A number of individual homebuilders are seeing action as well. 113K calls and 40K puts traded across the sector. Lennar (LEN) Nov 15 calls are the most actives, with 12,199 traded and 70 percent hitting ask-side. Players are also showing interest in Hovnanian (HOV) Nov and Dec 5 calls, KB Homes (KBH) Nov 17 calls, DR Horton (DHI) Nov 12.5 calls, Pulte Homes (PHM) Nov 10 calls, Toll Brothers (TOL) Nov 14 calls. While existing home sales data are due out tomorrow, some market watchers also note that today’s flurry of activity might be in anticipation of an extension of tax credits for first time homebuyers — perhaps continuing the program and extending to all new home buyers?

SPDR Homebuilders Trust (XHB) is up 30 cents to $14.59 and a block of 30K Dec 16 calls traded this morning for 75 cents. Existing open interest is more than 85K and today’s trades might close out positions opened in July. For example, on July 24 a player bought to open 40K for 57.5 cents on ISE.

Select Sector Homebuilders (XHB) is up 2 cents to $13.53 and making a run to session highs. 42.6K Dec 16 calls traded, including a block of almost 40K contracts on the ISE for 57.5 cents, which is an opening customer buyer, according to sentiment data. Meanwhile, another investor entered a substantial reverse diagonal–buying 20000 Sep 14 calls, while selling 20000 Dec 16 calls. The bullish flow comes the day after a report on June existing home sales improved more than economists expected. New home sales data are scheduled for Monday and the Case Shiller Home Price Index is due out Tuesday.

SPDR Homebuilder Trust (XHB) is up 29 cents to $11.57 and making a run to session highs despite bleak housing data. New home sales fell .6 percent to an annualized rate of 342K in May, according to data released 15 min ago. Economists were looking for an increase to 360K. XHB wavered on the news, but has since moved to its best levels of the day. XHB July 12 calls are seeing some action, with 4,369 traded, compared to open interest of 12.1K.