DHI Reports Earnings Before the Open Tomorrow

D.R. Horton, Inc. (DHI) is a U.S. based homebuilder operating in 27 states and closing over 24,000 homes in the last fiscal year. DHI is currently trading around $23.50 (+1.51%) in a 52 week range of $17.67-$25.23. The stock has been underperforming the broader market this year with shares rallying 5.10% year to date. DHI is set to report earnings tomorrow before the opening bell.

DHI has rallied 5 of the past 8 quarters on earnings day with an average move of 8.7%. Market makers are currently implying a move of a round $2.20 (9.4%) by this Friday’s close. DHI is looking strong on the daily chart with shares now trading above the cloud and the future cloud sloping higher. With strong technical and historical earnings movement I am looking for a potential long in DHI.

Trade: Buying the DHI Nov 14th Weekly 24.5-25.5 Call Spreads for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $24.75

This trade sets up well at the measured move target and gives a trader a 3-1 reward to risk setup. My exit plan for this trade would be to sell half for a double tomorrow and hold the balance until expiration.