Options Traders Can Score a Post-Harvey Deal on Lowe's Stock

LOW stock has shed 15% since hitting a record high in early May

Managing Editor
Aug 29, 2017 at 3:15 PM
facebook X logo linkedin

Home improvement retailers are in focus, following the devastation left behind by Tropical Storm Harvey. As Home Depot stock trades near a key technical level, Lowe's Companies, Inc. (NYSE:LOW) is clinging to a week-to-date lead. Below, we will look at LOW stock, and see how options traders have been placing their bets.

At last check, the stock was down 0.4% to trade at $73.52 -- but remains 0.2% higher on the week. Nevertheless, the recent trend has been lower, with LOW off 15% from its May 9 record high of $86.25. This downside was exacerbated last week, following a negative earnings reaction for Lowe's stock. 

Looking at the options pits, LOW's Schaeffer's put/call open interest ratio (SOIR) of 0.28 ranks in just the 13th percentile of its annual range. This suggests short-term option players have rarely been more call-heavy during the past 12 months. Drilling down, peak open interest of 29,279 contracts is found at the September 77.50 call. In fact, not a single put ranks in LOW's top 10 open interest positions.   

Data from the major options exchanges shows a mix of buy- and sell-to-open activity at the September 77.50 call in recent months. Those initiating long calls expect LOW to close north of the strike at the close on Friday, Sept. 15 -- when the options expire -- while those writing the calls bet on $77.50 serving as a ceiling for the shares.

However, put buying has ramped up in the last 10 days. This is evidenced by LOW's 10-day put/call volume ratio of 0.81 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- in the 85th percentile of its annual range. In other words, puts have been bought to open relative to calls at a faster-than-usual clip.

Regardless of the direction speculators expect Lowe's stock to move, the good news for options traders is that it's a prime time to buy premium. LOW's sports a Schaeffer's Volatility Scorecard (SVS) of 75, which indicates the home improvement shares have exceeded options traders' volatility expectations during the past year.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI