Shares of home improvement retailer Home Depot (HD) slid to around $300 per share in recent weeks before starting a strong bounce higher. One trader sees that trend continuing into the next week.
That’s based on the July 9 $330 calls. Over 14,880 contracts traded against a prior open interest of 136, for a 109-fold surge in volume. The buyer of the calls paid about $0.68.
With shares around $318, they would need to rise another 4 percent in a week in order for the trade to have any value at expiration.
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The home improvement retailer has fared well in the past year thanks to higher spending on housing projects, yet shares have underperformed the S&P 500 by 13 points.
Action to take: Investors might want to look at buying shares on another of the company’s periodic dips, likely to a price near $300. That would still be a big discount from the company’s 52-week high near $345.
Traders might like these short-term options, as long as they grab a quick profit in a day or two. Given the company’s current uptrend, an option trade that has a further-dated strike price may offer better returns with a lower possibility of going to zero.
The September $320 calls are an at-the-money trade. Last going for about $11.30, they offer strong double-digit growth with more time for the trade to play out.
Disclosure: The author of this article has a position in the company mentioned here, and may make further trades after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.