Mike Khouw Sees Unusual Options Activity In Toll Brothers

On CNBC's "Options Action," Mike Khouw said he saw three times as many calls trading than usual in Toll Brothers Inc TOL on Monday. Calls outpaced puts by more than 2.5 to 1.

The company is going to report earnings on Tuesday and the options market is implying a move of 6.50% in either direction, which is exactly in line with the average move on earnings.

The most active options were the July $65 calls as 465 contracts were sold for $1.60, said Khouw. The trade breaks even at $66.60. This is not necessarily bearish as the strike is around 10% above the closing price on Monday.