The housing sector has continued to strengthen amid the broader market’s recent turmoil, and traders with bullish positions on Home Depot have been rewarded.
On April 21, Investitute’s tracking systems identified the purchase of 15,250 June $155 calls for $1.41 as part of a bullish vertical spread with shares at $148.61. Volume was well above the strike’s open interest of 5,265 contracts, indicating that this was a new position.
Those calls traded for $2.51 this afternoon, nearly doubling in value. The stock was up only 1.46 percent in the same time frame, highlighting the type of leverage that can be obtained through options. It was the second bullish HD trade in the last month, following a gain of nearly 1,000 percent in May calls last month.
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 rose 1.8 percent to $156.76 today. The home-improvement giant pulled back from an all-time high of $160.86 after its last earnings report on May 16, but shares have bounced at their rising 50-day moving average this week. Several homebuilders, as well as the iShares Dow Jones U.S. Home Construction Fund, hit 52-week highs today.