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

Stock Market Shifts Gears: Indexes Plunge After Climb

March 19, 2025

Financials’ Strong Week Lifts Them to Within a...

March 3, 2025

DP Trading Room: Carl’s Grab Bag! – Chipotle...

June 26, 2024

Three Technical Tools to Minimize Endowment Bias

February 11, 2025

Strongest Top 3 S&P 500 Stocks: Will They...

January 4, 2025

Stock Market’s Spectacular Q3: Highest Sector Performer is...

October 1, 2024

S&P 500 Equal Weight ETF Gains Strength

August 5, 2024

Breakouts, Momentum & Moving Averages: 10 Must-See Stock...

June 1, 2025

MEM TV: Here’s How to Trade Explosive Stocks...

May 18, 2024

Rules-Based Money Management – Part 6: Putting It...

May 23, 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

    • Progressive power players rally voters for Zohran Mamdani as early voting kicks off in NYC mayoral race

      October 27, 2025
    • The 5 longest government shutdowns in history: What happened, how they ended

      October 27, 2025
    • Trump dances with Malaysian performers as he kicks off Asia tour in lively fashion

      October 27, 2025
    • Swalwell demands 2028 Dem candidates vow to destroy Trump’s White House ballroom project

      October 27, 2025
    • PHOTOS: The making of Trump’s White House ballroom, a look at the construction progress

      October 27, 2025

    Categories

    • Business (1,125)
    • Investing (3,343)
    • Politics (4,079)
    • 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