KB Home (NYSE: KBH) shares are trading higher after a report that hedge fund manager Edward Lampert has bought "small stakes" in homebuilders Centex (NYSE: CTX) and KBH, thinking that the housing market may be poised for a recovery. Investors are taking this news as a good sign for KBH. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on KBH.

After hitting a one-year high of $44.51 last June, the stock hit a one-year low of $15.76 in January. KBH opened this morning at $18.21. So far today the stock has hit a low of $18.15 and a high of $19.07. As of 12:00, KBH is trading at $18.87, up 1.00 (5.6%). The chart for KBH looks bearish and steady, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in just five weeks as long as KBH is above $15 at July expiration. KBH would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.

KBH hasn't been below $15 at all in the past year and has shown support around $17.50 recently. This trade could be risky if the financial sector continues to tumble or if the Fed makes its first interest rate hike in a while, but even if that happens, this position could be protected by the support the stock might find around $16 where it put in a bottom in January.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in KBH.