Calls sold as Home Depot hits record

optionMONSTER

Home Depot ended last week at record highs, but one large trader apparently believes that further gains will be limited for the home-improvement chain.

optionMONSTER systems show that a block of 22,750 May 75 calls was sold for the bid price of $0.67. The volume was more than 4 times higher than strike's open interest of 5,159 contracts before the session began, clearly showing that this is a new position.

These options could have been sold naked, but it is far more likely that they were traded against long shares in a covered call strategy. This position would be bullish up to the $75 strike price but would give up any gains beyond that. The sale of calls looks to capture option premium while holding onto stock that is trapped in range-bound trading. (See our Education section)

HD rose 2.39 percent on Friday to close at $73.62, a new lifetime high and just off the intraday peaked reached just before the bell. More than 75,000 HD options traded, compared to a daily average of 13,300, as calls outpaced puts by more than 2 to 1. 

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