Possible Earnings Surprise Indicated by Odd Trading Patterns in Builders FirstSource (BLDR)
Builders FirstSource (BLDR), the largest U.S. supplier of building products for new residential construction, has been generating interest in the financial market due to a notable pattern in its stock trading and unusual options activity.
Over the past 10 weeks, the market has voted to buy BLDR stock six times and sell it four times, resulting in an upward trajectory known as the 6-4-U sequence. This pattern, combined with recent unusual options activity, has sparked intrigue among market participants.
The 6-4-U sequence, statistically speaking, has a p-value of about 7.83%. While this does not definitively signify significant intentional trading behavior, it is empirically intriguing and suggests that the pattern may not be purely random.
Ahead of BLDR's upcoming earnings report, there has been notable options volume aligning with a bullish strategy. For instance, the 140/145 bull call spread, expiring mid-August, has attracted attention. This trade involves buying calls at a $140 strike and selling at $145, with the aim of a significant payout if BLDR’s stock price exceeds $145 post-earnings.
However, the expected move suggested by the 6-4-U pattern alone falls just short of the $145 target, implying that a positive earnings result would be needed to fully realize the gains.
The unusual options activity and the upcoming earnings have made BLDR stock worth keeping an eye on. In fact, on Monday, total options volume for BLDR stock hit 6,231 contracts, a nearly 85% lift over the trailing one-month average. The call volume for BLDR stock on Monday was 3,127 contracts, while put volume was 3,104 contracts, yielding a relatively even put/call ratio of 0.993.
Moreover, aggressive speculators may consider the 140/145 bull call spread expiring Aug. 15, with a net debit paid of $190 and a maximum reward of $310 (over 163%).
It's important to note that the smart money is selling $140 puts expiring in September, indicating that the market expects BLDR to maintain a stock price above $129.40. A positive earnings surprise could potentially swing the share price to $145 or higher.
As BLDR is scheduled to release its earnings results this Thursday before the opening bell, traders are potentially betting on a positive surprise or stronger momentum after the earnings report. With the 6-4-U sequence and unusual options activity signaling increased market interest and speculation about BLDR's earnings outcome, the stock is certainly a key player to watch closely during this period.
Since the start of the year, BLDR stock is down more than 5%, while the S&P 500 index is up almost 7%. However, running a one-tailed binomial test on the 6-4-U sequence reveals a p-value of 0.0783, suggesting a 7.83% chance that the implications could materialize randomly.
In the past 52 weeks, BLDR stock has given up more than 19% of its market value. Yet, assuming the positive pathway, the median return stands at 3.88%, potentially bringing BLDR stock close to the $141 level.
Our website's options flow screener, which focuses on big block transactions likely placed by institutional investors, shows that net trade sentiment for BLDR stock on Monday was $55,100 above parity, favoring the bulls. The biggest transaction by dollar volume on Monday was $210,000 worth of sold puts expiring Sep. 19, 2025, with a strike price of $140.
In conclusion, the significance of the 6-4-U sequence and unusual options activity is that they collectively highlight increased market interest and speculation about BLDR's earnings outcome. Traders are potentially betting on a positive surprise or stronger momentum after the earnings report, making BLDR a stock to watch closely during this period.
- Investors and traders are closely monitoring Builders FirstSource (BLDR) due to the 6-4-U sequence in its stock trading and unusual options activity, with some considering a bullish strategy like the 140/145 bull call spread.
- The upcoming earnings report of Builders FirstSource (BLDR) has sparked interest among financial markets, as a positive earnings surprise could potentially result in the stock price exceeding $145, yielding significant gains for those who have purchased this bull call spread.
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