Homebuilder Stocks Continue To Tank

Despite the “robustly” rigged GDP number, padded by a dubiously large attribution to construction and home improvement spending, the homebuilder stocks continue their huge sell-off, which started last week. I say that the GDP attribution for construction and home improvement spending is “dubious” because the numbers compiled, massaged and reported by the Government do not correlate with the reports being released by construction industry companies and industry associations or with home improvement/furnishings retailers.
Here’s a daily graph of the Dow Jones Home Construction Index:

The homebuilders currently represent what I believe to be on the of the lowest risk/return short-sell plays in the market right now. Every single one I look at is borrowing $100′s of millions to build up what has become “bulging” home and land inventories.
Most of them will not make it through the next downleg of the housing bear market.
I have written my first research report on a homebuilder short-sell idea .  I believe this stock has an easy 60% return from where it trades now. You can access this report here:   My Research Reports.
Because of the large sudden drop in the homebuilder stocks over the last week, I would suggest reading my report and waiting for an oversold bounce before entering the short. However, you can also short near money calls that expire 3 or 4 months out to start a position now. The reason to do this is you get to hold the premium from shorting the call. If the stock keeps dropping, you can cover the call for a profit or hold it to expiration and keep the entire premium. If the stock moves above the call price by expiration, you let the call exercise and establish a short at an average price of the strike price PLUS the premium you collected from shorting the call.
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