Market Insights

Someone’s looking for DIY giant Home Depot to make a fast move this week.

Heavy call volume was detected in the short-term weekly contracts expiring this Friday:

• About 15,000 2-July 320 calls were purchased, initially for $1 to $1.19. Premiums quickly rose to $1.30 and then above $2.30 by 11 a.m. ET.
• Almost 14,000 2-July 330 calls were purchased, initially for $0.55. Buyers later paid about $0.70.
• Volume was more than 9 times open interest at both strikes, an indication of new money entering the market.

Call options fix the price where investors can purchase a stock. They can appreciate quickly when prices rise and expire worthless when they don’t. In this case, traders seem to expect a quick rally in coming days.

HD rose 1.1 percent to $317.84 in midday trading. The stock’s down about 8 percent from its record high on May 10, but has been trying to rebound in the last two weeks. It’s now pushing against a potential resistance area near the late-April low and the early June high. Prices are also challenging the 50-day moving average.

Today’s jump followed a report by S&P CoreLogic Case-Shiller that home prices rose almost 15 percent in April — quicker than March’s 13 percent increase. The trend of rising prices and home equity can potentially make consumers more willing to spend on their residences. Separately, the June consumer confidence report suggested Americans plan to increase spending despite higher inflation.

Overall options volume in HD is twice the monthly average so far today, with calls outnumbering puts by more than 7-to-1.