Options traders are rapidly moving in on the now-oversold HD
Shares of blue chip Home Depot Inc (NYSE:HD) are off 3.9% to trade at $345.93, after the home improvement chain reported adjusted third-quarter earnings of $3.74 per share, which fell short of estimates. While revenue topped forecasts, Home Depot also slashed its full-year outlook, citing weak demand and less storm damage to homes of late. The report has sector peer Lowe's (LOW) also in the red today.
Should these losses hold, HD will be headed for a fifth-straight drop and worst single-session performance since April 3. HD is now 11% lower in 2025 and almost 20% off year to date highs at $426 from September. The upside for contrarians is the skid has the stock's 14-Day Relative Strength Index (RSI) now in "oversold" territory at 20.
Options are being picked up at a rapid pace in response. So far, 16,000 calls and 18,000 puts have been purchased today, five times the average intraday pace. Most popular are the November 260 call and 335 put of the same series, the former of which is seeing new positions bought to open.
Calls have been more popular than usual over the past 50 days. This is per Home Depot stock's 50-day call/put volume ratio of 2.15 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks higher than 93% of readings from the past year.
HD also tends to outperform options traders' volatility expectations. This is per its Schaeffer's Volatility Scorecard (SVS) of 70 out of 100.