Shares of home improvement retail chain
Home Depot (HD) have slid sharply with the overall market in recent sessions. One trader is willing to bet that shares are ready to move higher.
That’s based on the March $390 calls. With 49 days until expiration, 13,811 contracts traded compared to a prior open interest of 386, for a 36-fold rise in volume. The buyer of the calls paid $4.75 to make the trade.
The stock recently traded closer to $360, so it would take a move higher of just over 8 percent for the call options to move in-the-money. Shares have traded as high as $420 before the recent selloff.
Even with the recent pullback, shares are still up 33 percent over the past year.
Action to take: Investors should consider buying shares here, as the stock rarely drops to its 200-day moving average as it has in recent sessions this week. Growth is still high for such a large company, with earnings up 20 percent in the past year. and today’s investors can get a starting dividend yield of 1.8 percent.
For traders, the March $390 calls are attractive for their price. And they could pay off well if shares rebound quickly from prices near here. If shares don’t rise high enough or quickly enough, however, the option could end up losing all its value, so traders will want to cash out on a move up in the coming weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.