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Consider Homebuilder (ITB) Put Spread Hedges as Sector Has Dislocated From the Overall Market

Published on September 24, 2025

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By

Jeff Jacobson

Since peaking on Sept 5th at 118, the main homebuilder etf, ITB, has since declined by ~ 9.3%. Perhaps of bigger concern regarding this pullback is that is has happened with the overall market hitting new highs and rates trading at about the same level they were back on 9/5. This weakness/underperformance could be a signal that the homebuilding stocks could be in for more pain should we either see a selloff in the overall market and/or we see a move back higher in yields. Some of these concerns were raised by our portfolio strategy team in a note Monday morning (here).

The earnings reaction from Lennar (LEN) last week, when it dropped by more than 8% on the two trading days post-earnings, should be a wake-up for investors who have been long the sector playing for a rebound (especially after the 35% rally in the group from the June lows to the Sept highs as markets rallied and yields moved lower). Over the next five weeks we will also get earnings from DHI (15.5% of ITB), PHM (8.6% of ITB) and NVR (4.7% of ITB). Based on the poor reaction we saw from LEN (2nd largest weighting in ITB @ 9.4%), I believe sector hedges that capture these upcoming earnings make a lot of sense (especially with ITB vol still near the lows).

Trade:
Buy ITB Oct 31st 105/95 put spread for ~ $2.40 (ITB 107.03 stock ref)

Trade Details:

  • Buying the ITB put spread now that the sector has dislocated from the markets and after the negative price action in Lennar (LEN) post earnings/guidance
  • Oct 31st expiry captures earnings for the next 3 largest weightings in ITB (PHM on 10/21, NVR on 10/22 and then DHI on 10/28)
  • Put spread starts ~ 2% below spot
  • Structure can be used to hedge homebuilder/housing long exposure, or as a limited-risk bearish bet
  • Please contact me or the 22V sales team for updated pricing and execution capabilities

ITB with a clear break below the June uptrend (after the 35%+ rally)

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AI-generated content may be incorrect.

ITB has been diverging from both SPY and IWM since peaking earlier this month

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AI-generated content may be incorrect.

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