Home Improvement Name Gearing Up for Earnings

The home improvement stock tends to underperform after earnings

Deputy Editor
Aug 11, 2022 at 12:19 PM
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Home improvement retailer Home Depot Inc (NYSE:HD) is up 0.3% at $312.42 in afternoon trading, just ahead of the blue chip's second-quarter earnings report that's due before the market opens Tuesday, Aug. 16. Here's a closer look at how HD has been performing in the lead up to the event, and what the options market is pricing in for the equity's post-earnings session.

Though the 20-day moving average stepped in to help Home Depot stock move up the charts in recent weeks, the security continues to underperform the broader market with a 24.7% year-to-date deficit. Today's positive price action was capped by the 150-day trendline late, as the equity continues to battle a familiar closing ceiling at the $312 level.

HD Chart August 11

Diving into HD's earnings history, the stock has closed lower the day after six of the company's past eight quarterly reports, including an 8.9% dip in February. Overall, the shares have averaged a 3.5% swing the day after reporting, regardless of direction. This time around, Home Depot options traders are pricing in a slightly wider, 5.1% swing for Wednesday's trading.

Looking at options, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows the equity sports a 50-day put/call volume ratio of that ranks in the 88th annual percentile. In other words, puts have been purchased over calls at a faster-than-usual clip of late.

Echoing this, the Home Depot stock's Schaeffer's put/call open interest ratio (SOIR) of 1.28 lands in the 81st percentile of its annual range. This suggests that near-term options traders are more put-biased than usual right now.


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