SPDR S&P Homebuilders (NYSEArca: XHB) has rallied an astounding 50% YTD versus the S&P 500 Index’s return of 16.01%. In the trailing one year period, XHB has vaulted a jaw-dropping 90.84% versus the S&P 500’s return of 28.23% during the same time period.

Based on recent options flows, apparently at least one investor seems concerned that the sector’s run may not last forever. We have seen a recent trend of put buying in XHB, and this could be outright speculation on a reversal in the sector’s strength if not a hedger attempting to lock in gains on a long position in the underlying ETF.

Rising home prices, increasing housing starts, a general loosening of lending standards and greater turnaround time in the cycles of mortgage loan closings, coupled with a more benign economic atmosphere in terms of where the equity markets are today and the nation’s job situation as compared to one year ago today, have wholly contributed to the huge run in Homebuilder stocks and related names.

While XHB may be the largest ETF in the Homebuilders space in terms of assets under management (currently $2.03 billion), it is important to note that for pure homebuilders exposure, iShares DJ U.S. Home Construction (NYSEArca: ITB), is the more appropriate choice.

ITB’s top holdings are pure homebuilders, currently LEN, DHI, PHM, TOL, and NVR. XHB, and a related ETF, PowerShares Dynamic Building & Construction (NYSEArca: PKB), contains not only Homebuilder stocks but also companies that stand to benefit from the construction and sale of new homes.

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