Home Depot Tests Key Levels Amid Harvey Devastation

Home Depot calls are active once again

Aug 28, 2017 at 3:18 PM
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Home Depot Inc (NYSE:HD) is in focus today due to the fallout surrounding Hurricane Harvey. Coming off the company's earnings release earlier this month, the stock was last seen trading 1.2% higher at $151.51, putting it in close proximity to a few notable technical levels. The round $150 level sits just below HD's current level, and right above the $151 mark, which represents a 23.6% Fibonacci retracement of HD's November low to its all-time high from May. Home Depot's 10-week moving average is also in the $150-$151 range.

home depot stock

In the meantime, short-term options traders are jumping on home improvement retailer today. Calls are trading at almost two times the expected pace today, with the single-day put/call volume ratio of 0.23 sitting just two percentage points from a 12-month low. The most popular option is the weekly 9/1 152.50-strike call, which expires this Friday. Anyone buying to open positions here are betting on the shares extending their upside by the end of the week. 

These options bulls are certainly opportunistic. Home Depot has a Schaeffer's Volatility Index (SVI) of 14%, ranking below 86% of all readings from the past year. This means volatility expectations for near-term options are unusually low right now -- which is what premium buyers want to see. 

Looking back, call buying has been the norm in HD's options pits. The stock has a 10-day call/put volume ratio of 1.60, showing long calls have easily outpaced puts in recent weeks. Moreover, the equity's Schaeffer's put/call open interest ratio (SOIR) stands at 0.70, so call open interest outweighs put open interest among options expiring within the next three months. 
 

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