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Call Buying Booms as At Home Stock Sells Off

Karee Venema

At Home Group Inc (NYSE:HOME) stock is getting slaughtered today, down 47.2% to trade at $9.25 -- marking its first trip into single-digit territory since it began trading publicly in August 2016. The bear gap comes after the home decor retailer reported an adjusted first-quarter earnings miss of 21 cents per share, while same-store sales fell a wider-than-anticipated 0.8%.

At Home CEO Lee Bird called the first quarter "challenging," as the retailer "faced unusually adverse weather across a majority of our markets." The company also lowered its full-year guidance "to reflect a softer start and recent industry trends, the related markdowns, and the margin impact of recently raised 25% tariffs."

HOME stock has a history of making volatile post-earnings moves, and should today's price action carry through to the close, it will be the equity's third straight quarter logging a next-day double-digit percentage drop. Plus, the shares are comfortably on track for their worst day ever. And since their mid-July peak near $41, the shares have surrendered almost 76%.

Nevertheless, call traders are flooding the stock's options pits today, with 18,447 contracts traded already -- a new annual high, and almost 16 times the number of puts on the tape. The September 15 call is most active, and it looks like new positions are being purchased here today. If this is the case, speculators expect HOME to break out above $15 -- site of the retailer's initial public offering (IPO) -- by September options expiration.

The action at this deep out-of-the-money call could also be the result of shorts hedging against any upside risk. Short interest on HOME jumped 18.5% in the most recent reporting period to 9.7 million shares, representing 18.7% of the stock's float. These bears are sidelined for the rest of this week's trading, though, with At Home on the short-sale restricted list.