Put Players Pounce On Home Depot Inc (HD)

Home Depot Inc (NYSE:HD) is higher today on a bullish brokerage note and broad-market tailwinds

Jun 23, 2016 at 12:14 PM
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Similar to a pair of its fellow Dow stocks, Home Depot Inc (NYSE:HD) is higher on the back of a bullish brokerage note and broad-market tailwinds. Specifically, HD stock is up 0.3% at $127.97, after Nomura raised its rating to "buy" from "neutral" and its price target to $155 from $140, saying, "market share gains, competitive advantages, a solid underlying market, and strong management all position the company well for growth and provide downside protection." Options traders aren't sharing in this upbeat outlook, though, with puts outpacing calls by a healthy margin.

Today's put-skewed session just mirrors the withstanding trend seen in HD's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.97 ranks higher than 98% of all comparable readings taken in the past year. In other words, puts have been bought to open over calls at a near-annual-high clip.

Echoing this is HD's Schaeffer's put/call open interest ratio (SOIR) of 1.74. Not only does this show that put open interest almost doubles call open interest among options expiring in three months or less, but it arrives in the 95th annual percentile. Simply stated, short-term speculators have rarely been as put-skewed toward HD as they are now.

Drilling down on the front-month series, put players have set their sights on the July 125 strike recently, with 3,108 contracts added over the past 10 sessions. However, options traders have initiated both long and short positions here, according to the major options exchanges. Those buying to open the puts expect HD to retreat below $125 by the time the options expire at the close on Friday, July 15, while those selling to open the puts are betting on the strike to serve as a short-term foothold for the shares.

Technically, HD is up 14% year-over-year. More recently, the shares of Home Depot Inc (NYSE:HD) pulled back to their 200-day moving average after notching a record high of $137.82 on May 10. The stock appears to be bouncing from this rising trendline, though, which has served as a springboard for the shares on a number of occasions over the past 12 months.

HD daily chart June 23

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