Sport Investors League
  • Politics
  • Stocks
  • Investing
  • Business

Sport Investors League

  • Politics
  • Stocks
  • Investing
  • Business
Stocks

A Practical Options Strategy to Trade Home Depot

by admin June 5, 2024
June 5, 2024
A Practical Options Strategy to Trade Home Depot

America’s largest home improvement store, Home Depot, Inc. (HD), has benefited from a long period of investor interest and traded at a premium valuation for several years. However, the recent environment of slowing consumer spending and higher interest rates has finally caught up with HD; the risks are to the downside, below $300.

After rallying toward its all-time highs just shy of $400, HD has pulled back below its key $350 and $335 support levels and is at risk of continuing lower. HD’s relative performance recently reached a new 52-week low. This suggests further downside risks, with targets at the next support lower, just below $300.

FIGURE 1. DAILY CHART OF HOME DEPOT (HD). The price of HD stock has broken below a key support level and could see further downside.Chart source: StockCharts.com. For educational purposes.

Trading at 21x forward earnings, HD is still trading at a premium, given that analysts are only expecting Earnings-Per-Share (EPS) and Revenue to grow at low single-digit levels, while net margins sit below 10%. The reality is that with relatively thin margins and consumer spending further slowing down, HD will have a tougher time commanding the same type of premium valuation relative to the market. 

Options are inexpensive now, so buying downside exposure is cheap, and can be done by going out to August and buying the $325/300 Put Vertical @ 6.50 debit. This entails buying a higher strike put and selling a lower strike one (see below).

  • Buying the Aug $325 Puts @ $9.35 Debit
  • Selling the Aug $300 Puts @ $2.85 Credit

FIGURE 2. EXAMPLE OF A PUT VERTICAL SPREAD OPTIONS TRADE FOR HD.

This would risk a total of $650 ($935 – $285) per contract if HD is above $325 at expiration, while potentially making nearly three times that of $1,850 per contract if HD is below $300 at expiration.


0
FacebookTwitterGoogle +Pinterest
previous post
Visualizing the Holdings for a Dual Momentum Rotation Strategy
next post
3 Keys to Finding the Strongest Trends

Related Posts

Bearish Signals & Risk Management: Protect Your Portfolio!

February 28, 2025

AU Surges Above Resistance: Here’s How to Take...

April 2, 2025

Two ETFs That Could Thrive Based on a...

December 6, 2024

S&P 500 Dives After Failed Test of Price...

April 2, 2025

Week Ahead: NIFTY Violates Key Support Levels; Drags...

October 27, 2024

Growth is Alive and Kicking for S&P 500

May 23, 2024

3 Stock Setups for the Second Half of...

June 28, 2025

S&P 500 Sinks on Software and Semiconductor SELLOFF

May 31, 2024

Pre-Earnings Moves Are Underway And History Provides Us...

July 7, 2024

Can the S&P 500 Rally Without Tech?

December 3, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent

    • Trump demands NATO allies halt Russian oil purchases before new US sanctions

      September 16, 2025
    • Ilhan Omar’s committee assignments under threat after ‘disparaging Charlie Kirk’s legacy’

      September 16, 2025
    • Maurene Comey sues DOJ for ‘unlawful’ firing, demands reinstatement

      September 16, 2025
    • Israel’s military chief backs Witkoff plan over Netanyahu’s Gaza takeover, sources say

      September 16, 2025
    • White House pushes for $58M security increase in wake of Kirk assassination

      September 16, 2025

    Categories

    • Business (1,105)
    • Investing (3,044)
    • Politics (3,717)
    • Stocks (1,155)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: sportinvestorsleague.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 sportinvestorsleague.com | All Rights Reserved