Unusual Options Activity: Home Depot (HD)

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.

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  • 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.

    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.

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  • 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.

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