Options Brief: Home Depot (HD)

HD – The Home Depot, Inc. – The home improvement supplies retailer attracted bearish options strategists throughout the trading session with shares of the underlying stock slipping into the red this afternoon to stand 0.30% lower on the day at $28.54 as of 2:45 pm (ET). It looks like some investors expecting shares to decline and remain depressed for the next couple of months sold approximately 10,000 calls outright at the August $28 strike for an average premium of $1.95 apiece. Investors selling the calls keep the premium received on the sale as long as Home Depot’s shares trade below $28.00 through expiration day in August. Another pessimistic player with a longer-term bearish view on the stock initiated what appears to be a large-volume credit spread in the November contract. The investor looks to have sold 10,300 calls at the November $37 strike for a premium of $0.14 apiece, and purchased the same number of calls at the higher November $40 strike for an average premium of $0.04 each. The trader pockets a net credit of $0.10 per contract on the trade and keeps the full amount if, by November expiration, shares of the underlying stock fail to rally above $37.00. The parameters of the spread dictate maximum potential losses of $2.90 per contract for the investor should shares jump 40.15% over the current price to exceed $40.00 by expiration day. Losses start to accumulate for the credit spreader if HD shares rally 30% to surpass the effective breakeven price of $37.10 ahead of expiration day in November.