Back Derivatives Strategy

Very Timely Homebuilder Hedge Trade Idea Ahead of Several Key Earnings

Published on January 16, 2026

Jeff Jacobson

I believe the nearly 15% rally in the main homebuilder etf (ITB), into potential resistance, has created an extremely attractive opportunity to establish low-cost hedges or limited-risk bearish bets ahead of some key earnings. The sector has rallied on the heels of President Trump’s mandate to buy $200 BLN is mortgage bonds, the broadening-out trade, and a move lower in yields. With that being said, let’s not forget that when some of the largest builders reported in December (LEN, TOL & KBH) they all MISSED on earnings and the stocks reacted rather poorly (5.1% average 1-day decline for those names). Over the next few weeks, we are due to get earnings from DHI, NVR and PHM (3 of the top-4 weighted names in ITB and collectively more than 30% of the entire weighting of ITB). Given the sharp rally over the past week or so for much of the sector, perhaps we could see a decent “give-back” should the earnings/fundamental story continue to weigh on performance?

ITB with a nearly 15% rally over the past week right into potential resistance ahead of several key earnings over the next few weeks

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Against that backdrop, ITB vol screens “cheap” when compared to the individual-name vols for some of the companies set to report. Since underlying moves in these top-weighted names are likely to impact the entire sector over the next month as they report earnings, I really favor the setup here to own “cheap” downside structures.

ITB Feb put vol looks “cheap” when compared with the put vols of DHI and PHM who are both reporting soon

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Trade:
Buy ITB Feb 105/93 put spread for ~ $2 (ITB 109.41 ref)

Trade Details:

Buying the main homebuilder sector Feb put spread following sharp 1-week rally right into potential resistance and ahead of several key earnings
We saw real weakness on both an absolute and relative level back in December as we received disappointing earnings from the likes of LEN, TOL and KBH
ITB vol screens cheap to the larger names reporting over the next 2 weeks (specifically DHI and PHM)
Put spread starts 4% lower, and is capped to the downside right at the November lows ~ 93
Trade offers a 5x to 1 max payout on the limited-risk hedge (or bearish bet)
DHI (largest weighting in ITB at nearly 15%) reports on Tuesday morning. With market closed on Monday TODAY would be the day to establish this trade
Please contract me or the 22V sales team for updated pricing and execution

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