Lowe's is on a roll for one big trader


Lowe's has been rising with the recovery in the housing market, and yesterday the home-improvement chain saw some bullish option activity.

optionMONSTER's Heat Seeker tracking system shows that a trader sold the October 29 calls for an average of $2.54 and bought the November 32 calls for about $0.72, with about 10,000 contracts in each leg. Volume was below open interest in the October calls but not in the Novembers, indicating that the trader was rolling a long position forward by a month and to a higher strike price.

Owning calls locks in the price where investors can buy the stock, so they rise when shares go higher. The October 29 calls had already performed well, so yesterday's trader is closing that position before it expires at the end of next week and is repositioning them in the November contracts in hopes of further gains, collecting a credit of about $1.82 in the process. (See our Education section)

LOW fell 0.69 percent to $31.55 yesterday. The shares have trailed those of larger rival Home Depot but have a very similar trading pattern, and yesterday R.W. Baird raised its price target for HD.

Calls outpaced puts in Lowe's by 24,000 to about 1,900. Total option volume was more than 5 times greater than average.

(A version of this post appeared on InsideOptions Pro yesterday.)

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