DailyPlay – Opening Trade (HD) – August 15, 2022

Bullish Opening Trade Signal

View HD Trade

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish

Details: Buy to Open 3 Contracts Sept 16, 2022 $310/$285 Put Verticals @ $6.33 Debit.

Total Risk: This trade has a max risk of $1,899 (3 Contracts x $633 per contract).

Counter Trend Signal: This is a Bearish trade on a stock that is experiencing a bullish trend. 

1M/6M Trends: Bullish/ Mildly Bullish

Technical Score: 4/10

OptionsPlay Score: 125

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note these prices are based on the previous day’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. This will be reflected in the Portfolio tab within the OptionsPlay platform.

Investment Rationale

Today’s DailyPlay trade is Home Depot (HD). We have seen a fair amount of decrease in the construction industry, which we expect to reflect in the earnings for HD this week. The stock has already declined by 30% since its peak, and lately, it had a significant bounce higher, but it is currently trading at a key level of $315. This level used to be a key support level, which has now turned into a key resistance level. When we look at the Relative Performance chart, we can see that HD is aiming toward the downside relative to its sector, which is an indication that fewer buyers are stepping in and that some buyers are getting out of their positions. The Home Construction numbers for June were lower than expected and we, therefore, believe that HD will trend lower after the earnings announcements this week. Finally, HD is currently trading at about 18 X next year’s earnings which are above the average of 14 X compared to its main competitor’s lows. 

HD – Daily