Bulls make big profits in $HD

Option traders who opened bullish positions in Home Depot (HD) at the beginning of last month are making big profits today.

On Jul. 7, Market Rebellion’s Unusual Activity Service found that 4,250 September $255 calls were bought as part of a complex bullish spread for $9.75 with shares at $248.48. This was clearly a new position, as open interest in the strike before that session began was only 843.

Those options traded for as much as $35.35 this morning, more than 3.5 times their purchase price. The stock rose 16.75% at the same time, underscoring how quickly options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

HD today closed down by 1.17% at $285.00 even, after making a new high earlier in the day at $290.58. The home-improvement giant reported earnings for its Q2 period before the opening bell today, noting online sales were up about 100% for the quarter.