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Calls sold as Home Depot hits record

Chris McKhann (chris.mckhann@optionmonster.com)

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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