Home Depot has struggled since reporting a disappointing earnings result last week, but options traders are bullish on the retail name.
have experienced opposite fates recently. The companies – which share ties to both the retail and homebuilder industries – reported earnings within a day of each other last week, and while Home Depot faltered, Lowe's surged higher. Over the past month, the stocks are down 6% and up 6%, respectively.," Home Depot might be about to catch a big break.
"We've talked about a lot of retail earnings over the last couple weeks, and there's been a lot of dispersion in the results," said Nathan. "[Home Depot] was kind of surprising. This stock gapped down from an all-time high on Nov. 19 and kept on going, but today, call volume got really hot. It was three times that of puts."
As Nathan would point out, the most active contracts in Tuesday's session were the Nov. 29 weekly $222.50, which traded for an average of 36 cents. That means these buyers are betting that Home Depot will close the week at least 1% higher than where it closed Tuesday. This relatively inconspicuous bet might not tell the whole story of how bullish options traders actually are about Home Depot.implied volatility"[Implied volatility] came down pretty hard after the earnings. I think once traders feel like the bad news is out of the way, you could see yourself setting up for a play back toward those highs up near $240 if there is good news at that Dec.
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