The Home Depot, Inc. (HD) is a home improvement retailer. The Company operates The Home Depot stores, which are full-service, warehouse-style stores. The Home Depot stores sell an assortment of building materials, home improvement and lawn and garden products and provide a number of services. HD is currently trading around $91.32 in a 52 week range of $73.74 – 93.75. The company’s stock has been outperforming the market this year with shares increasing 10.84% year to date. Today, a trader bought 13057 HD Oct14 91.0 Puts for $1.06. This order involves this trader laying out over $1.3 million in total premium.
Markets have been weak this past week, yet HD has held strong, surviving weak home sales numbers and a credit card data breach earlier this month. Also, Home Depot is trading above the Ichimoku Cloud on the daily chart, indicating that price momentum is still bullish. The stock is also trading about $2 off its 52 week high. This trader might be looking to hedge a stock position with this massive bet, in case the market continues to sell of and head lower.
Unusual Option Activity:
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/1usQnKR or through the only Unique Unusual Options Activity Scanner: http://bit.ly/1sCSaws
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
The Trades:
Buying the HD Oct14 91.0 Puts $1.06
Risk: $106 for every 1 lot
Greeks of these Trades:
Delta: Short
Gamma: Long
Theta: Short
Vega: Long