Schaeffer's 43rd Anniversary Stock Picks in 2024

HD Nails New Highs on Increased Foot Traffic

Home Depot calls are flying off the shelves today in response

Deputy Editor
Aug 17, 2020 at 10:15 AM
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The shares of Home Depot Inc (NYSE:HD) are up 1.7% at $285.21 at last check, and hit a new record high of $287.12 out of the gate this morning. This comes after data revealed that the company has seen a 35% increase in daily foot traffic since April. The jump comes despite pandemic-related cancellations, and speculation is that consumers are doing more work on their homes during the climate of social distancing. To follow, Oppenheimer and BofA Global Research both threw in price-target hikes to $320 and $290, respectively. 

Fresh off seven straight weekly wins, Home Depot stock is up 28.5% in 2020. Carving out a channel of higher highs since March, HD has relied on its ascending 20-day moving average to contain pullbacks. However, it's also worth noting that the stock's 14-day Relative Strength Index (RSI) of 78 sits firmly in "overbought" territory, meaning a short-term breather could be in the cards. 

On the analyst front, 11 out of the 19 in coverage sport a "buy" or better rating on the shares. More price target adjustments could be on the way though, as HD's 12-month consensus price target of $278.42 is now a 2.2% discount to current levels. 

Calls have been popular in the options pits. Home Depot's 10-day call/put volume ratio of 2.54 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands higher than 80% of readings from the past year, showing calls are being picked up at a faster-than-usual rate.  

Today is more of the same. At last check, 21,000 calls have changed hands in the first hour of trading today -- a rate that's four times the average intraday amount and fives times the number of puts traded. The most popular is the August 300 call, while there are also new positions being opened at the August 287.50-strike call.

That said, speculating on HD's next move with options could be a prudent play. The stock's Schaeffer's Volatility Index (SVI) of 29% stands higher than just 14% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 


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