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9 REITs With Bearish Options Sentiment

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As if the housing recovery wasn't slow and painful enough already, now there's a new foreclosure debacle to contend with. The media recently got wind of a little paperwork problem that could have potentially devastating consequences to the economy.

Here's the short version: banks, facing pressure to speed foreclosures along, cut a few critical corners in the process of transferring mortgage titles. As a result, there's now a big fat question mark around who actually owns these mortgages, and it could take a lot of time, and money, to sort out.

What's worse, some fear that this latest drama could escalate to 2008 crisis levels, when the mortgage-backed securities bubble popped.

However, most agree that banks probably won't choke this time around -- sorting out the paperwork should only be a minor hiccup in the grand scheme of things. It only exacerbates the underlying, ongoing issue: There are just too many houses on the market, and not enough buyers. Until jobs bounce back and the overall health of the economy improves, we're not likely to see a whole lot of improvement in the housing market ...

So what does this all mean for your portfolio? You may want to get a sense of how the market feels about housing stocks -- so check out what the options traders think of Real Estate Investment Trusts (REITs). (Note: A REIT is a security that invests in real estate directly. Think of it as a slice in a portfolio of real estate investments.)

Call options traders bet on a stock's upside; so, if a stock is seeing a lot of call options activity, that means options traders expect to see upward momentum over the coming weeks.

Put option traders, on the other hand, look for opportunities on the downside. So if a stock sees a flurry of put trading, it means that options traders expect a decline. Options traders are generally more sophisticated than your average investor, so it's not a bad idea to check on their trades when you're looking for ideas.

Here's a list of Real Estate Investment Trusts (REITs) that options traders think will falter. Is there pessimism justified? (Click here to access free, interactive tools to analyze these ideas.)

Options data sourced from Schaeffer's. The list has been sorted by the Put/Call ratio.



Options Market Sentiment

Equity One (NYSE: EQY  )

Retail REIT

Call open interest at 476 contracts vs. put open interest at 3,968 contracts (Put/Call ratio at 8.34)

Digital Realty Trust (NYSE: DLR  )

Industrial REIT

Call open interest at 973 contracts vs. put open interest at 5,748 contracts (Put/Call ratio at 5.91)

Cousins Properties (NYSE: CUZ  )

Diversified REIT

Call open interest at 291 contracts vs. put open interest at 1,239 contracts (Put/Call ratio at 4.26)

LTC Properties (NYSE: LTC  )

Health-Care Facilities REIT

Call open interest at 162 contracts vs. put open interest at 635 contracts (Put/Call ratio at 3.92)

Post Properties (NYSE: PPS  )

Retail REIT

Call open interest at 425 contracts vs. put open interest at 1,569 contracts (Put/Call ratio at 3.69)

BRE Properties (NYSE: BRE  )

Residential REIT

Call open interest at 615 contracts vs. put open interest at 1,808 contracts (Put/Call ratio at 2.94)

Essex Property Trust (NYSE: ESS  )

Residential REIT

Call open interest at 814 contracts vs. put open interest at 1,791 contracts (Put/Call ratio at 2.20)

Taubman Centers (NYSE: TCO  )

Retail REIT

Call open interest at 1,222 contracts vs. put open interest at 2,659 contracts (Put/Call ratio at 2.18)

Cypress Sharpridge Investments (NYSE: CYS  )

Diversified REIT

Call open interest at 229 contracts vs. put open interest at 467 contracts (Put/Call ratio at 2.04)

Interactive Chart: Press Play to see how the annual returns have fluctuated for all stocks mentioned above.

Disclosure: Kapitall's Eben Esterhuizen and Alicia Sellitti do not own shares of any companies mentioned.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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