DHI Covered Call Strategy
DHI (D.R. Horton, Inc.), in the Consumer Cyclical sector, (Residential Construction industry), listed on NYSE.
D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. It engages in the acquisition and development of land; and construction and sale of residential homes in 31 states and 98 markets under the names of D.R. Horton, America's Builder, Express Homes, Emerald Homes, and Freedom Homes. The company constructs and sells single-family detached homes; and attached homes, such as town homes, duplexes, and triplexes. It also provides mortgage financing services; and title insurance policies, and examination and closing services, as well as engages in the residential lot development business.
DHI (D.R. Horton, Inc.) trades in the Consumer Cyclical sector, specifically Residential Construction, with a market capitalization of approximately $39.91B, a trailing P/E of 12.77, a beta of 1.41 versus the broader market, a 52-week range of 114.17-184.55, average daily share volume of 2.6M, a public-listing history dating back to 1992, approximately 15K full-time employees. These structural characteristics shape how DHI stock options price implied volatility around earnings windows, capital events, and macro-driven sector rotations.
A beta of 1.41 indicates DHI has historically moved more than the broader market, amplifying both the directional payoff and the realized volatility relative to an index-equivalent position. DHI pays a dividend, which adjusts put-call parity and shifts the ex-dividend pricing across the listed chain.
What is a covered call on DHI?
A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income.
Current DHI snapshot
As of May 15, 2026, spot at $135.49, ATM IV 36.40%, IV rank 29.56%, expected move 10.44%. The covered call on DHI below is built from the same end-of-day chain, with strikes snapped to listed contracts and premiums pulled from the bid/ask midpoint at a 28-day expiry.
Why this covered call structure on DHI specifically: DHI IV at 36.40% is on the cheap side of its 1-year range, which means a premium-selling DHI covered call collects less credit per unit of strike-width risk, with a market-implied 1-standard-deviation move of approximately 10.44% (roughly $14.14 on the underlying). The 28-day window matched to the front-month expiry keeps theta exposure bounded while still capturing the post-snapshot move; longer-dated DHI expiries trade a higher absolute premium for lower per-day decay. Position sizing on DHI should anchor to the underlying notional of $135.49 per share and to the trader's directional view on DHI stock.
DHI covered call setup
The DHI covered call below is built from the end-of-day chain, with each option leg priced at the bid/ask midpoint of its listed strike. With DHI near $135.49, the first option leg uses a $142.00 strike; additional legs (when the strategy has them) anchor to spot-relative offsets. Premiums come from the bid/ask midpoint on the listed DHI chain at a 28-day expiry; the cross-strike IV skew is reflected directly in the per-leg values rather than approximated. Quantity sizing assumes one contract per option leg (or 100 DHI shares for the stock leg in covered calls and collars).
| Action | Type | Strike / Basis | Premium (est) |
|---|---|---|---|
| Buy 100 shares | Stock | $135.49 | long |
| Sell 1 | Call | $142.00 | $2.98 |
DHI covered call risk and reward
- Net Premium / Debit
- -$13,251.50
- Max Profit (per contract)
- $948.50
- Max Loss (per contract)
- -$13,250.50
- Breakeven(s)
- $132.52
- Risk / Reward Ratio
- 0.072
Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium.
DHI covered call payoff curve
Modeled P&L at expiration across a range of underlying prices for the covered call on DHI. Each row is one sampled price point from the computed payoff curve; the full curve uses 200 price points internally before being summarized into 10 rows here.
| Underlying Price | % From Spot | P&L at Expiration |
|---|---|---|
| $0.01 | -100.0% | -$13,250.50 |
| $29.97 | -77.9% | -$10,254.85 |
| $59.92 | -55.8% | -$7,259.20 |
| $89.88 | -33.7% | -$4,263.56 |
| $119.84 | -11.6% | -$1,267.91 |
| $149.79 | +10.6% | +$948.50 |
| $179.75 | +32.7% | +$948.50 |
| $209.71 | +54.8% | +$948.50 |
| $239.66 | +76.9% | +$948.50 |
| $269.62 | +99.0% | +$948.50 |
When traders use covered call on DHI
Covered calls on DHI are an income strategy run on existing DHI stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
DHI thesis for this covered call
The market-implied 1-standard-deviation range for DHI extends from approximately $121.35 on the downside to $149.63 on the upside. A DHI covered call collects premium on an existing long DHI position, trading off upside above the short call strike for immediate income; the short strike selection should reflect the trader's view on whether DHI will breach that level within the expiration window. Current DHI IV rank near 29.56% sits in the lower third of its 1-year distribution, where IV often re-expands toward the mean; this favors premium-buying structures and disadvantages premium-selling structures on DHI at 36.40%. As a Consumer Cyclical name, DHI options can move on sector-level news flow (peer earnings, regulatory updates, industry-specific macro data) in addition to DHI-specific events.
DHI covered call positions are structurally neutral to slightly bullish; the modeled P&L assumes European-style exercise at expiration and ignores early assignment, transaction costs, dividends paid before expiry on the stock leg (when present), and the bid-ask spread on the listed chain. DHI positions also carry Consumer Cyclical sector concentration risk; news flow inside the sector (peer earnings, regulatory shifts, supply-chain headlines) can move DHI alongside the broader basket even when DHI-specific fundamentals are unchanged. Short-premium structures like a covered call on DHI carry tail risk when realized volatility exceeds the implied move; review historical DHI earnings reactions and macro stress periods before sizing. Always rebuild the position from current DHI chain quotes before placing a trade.
Frequently asked questions
- What is a covered call on DHI?
- A covered call on DHI is the covered call strategy applied to DHI (stock). The strategy is structurally neutral to slightly bullish: A covered call pairs long stock with a short out-of-the-money call, collecting premium and capping upside above the short strike in exchange for income. With DHI stock trading near $135.49, the strikes shown on this page are snapped to the nearest listed DHI chain strike and the premiums come straight from the end-of-day bid/ask midpoint.
- How are DHI covered call max profit and max loss calculated?
- Max profit equals short-strike minus cost basis plus premium times 100; max loss is cost basis minus premium (at zero). Breakeven is cost basis minus premium. For the DHI covered call priced from the end-of-day chain at a 30-day expiry (ATM IV 36.40%), the computed maximum profit is $948.50 per contract and the computed maximum loss is -$13,250.50 per contract. Live intraday quotes will differ as the chain moves through the trading session.
- What is the breakeven for a DHI covered call?
- The breakeven for the DHI covered call priced on this page is roughly $132.52 at expiration, derived from end-of-day chain premiums. Breakeven is the underlying price at which the strategy's P&L crosses zero ignoring transaction costs and assignment risk. The current DHI market-implied 1-standard-deviation expected move is approximately 10.44%; if the move sits well outside the breakeven distance, the structure's risk-reward becomes correspondingly tighter.
- When should you consider a covered call on DHI?
- Covered calls on DHI are an income strategy run on existing DHI stock positions; traders typically sell calls at 25-35 delta with 30-45 days to expiration to balance premium against upside cap.
- How does current DHI implied volatility affect this covered call?
- DHI ATM IV is at 36.40% with IV rank near 29.56%, which is on the low end of its 1-year range. Premium-buying structures (long call, long put, debit spreads) are relatively cheap in this regime; premium-selling structures collect less credit per unit risk.