Home Depot Stock Call Volume Spikes Ahead of Earnings

Peak open interest is found at the March 200 and 210 calls

Feb 16, 2018 at 2:30 PM
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Home Depot Inc (NYSE:HD) is one of the headliners on next week's earnings calendar, with the home improvement retailer set to report alongside fellow blue chip Walmart (WMT) ahead of the open next Tuesday, Feb. 20. With the stock market closed on Monday for Presidents Day, options traders are blasting HD stock today -- and calls continue to be the contracts of choice.

At last check, roughly 25,000 HD calls had traded -- two times what's typically seen at this point in the day, and double the number of puts on the tape. While eleventh-hour speculators appear to be buying to open February 187.50 calls, which expire at tonight's close, pre-earnings options traders may be purchasing new positions at the weekly 2/23 190-strike call. If this is the case, the goal is for Home Depot stock to rally north of $190 by expiration at next Friday's close.

More broadly, traders have been buying to open calls over puts at a quicker-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), HD's 10-day call/put volume ratio of 2.23 ranks in the 81st annual percentile.

Drilling down, peak open interest for Home Depot is found at the March 200 and 210 calls, where nearly 16,000 contracts collectively reside. Data from the major options exchange confirms notable buy-to-open activity at each, meaning traders are betting on HD shares breaking out by March options expiration.

Looking at the charts, the highest the stock has ever traded was $207.61, tagged on Jan. 29. While the shares subsequently sold off during the stock market's worst sell-off in years, they stabilized atop their rising 80-day moving average. At last check, HD was trading up 0.5% at $186.16, following impressive housing data and a price-target hike to $205 from $178 at Oppenheimer, and was on track for its third straight win.

Recent history doesn't provide much of guide as to how Home Depot stock might trade after earnings, with the shares enjoying a next-day gain four times in the past eight quarters. However, the security's average post-earnings daily price move is 1.7%, regardless of direction, suggesting Tuesday's trading could be muted.


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