The back story: Last week, I wrote about the virtue of patience with Home Depot. I had never traded the stock or any options in it, but the chart was showing a red-to-green move and while I hoped for a bounce-back from oversold, I said I’d be patient and look for the right opportunity.
I was looking for a hammer candle that showed me the stock was due to gap up. I got that yesterday.
How I played it: On Tuesday, I bought August 11 $148 call options on HD – and alerted my members to the trade – thinking this would be a swing trade but looking/planning for a 10 percent intraday gain.
Ultimately, I didn’t just plan the trade, I traded the plan, and took my profit in one day because it moved faster than I expected.
What I’m looking for now: If the markets stay green today, which I expect, I’ll be looking at Home Depot options again. Specifically, if the stock shows a continuation pattern – staying above yesterday’s close of $146.97 – in early trading today, I’m ready to go again.
How I’ll play it: If I see what I’m looking for in the first 30 minutes of trading, I’ll again go with at-the-money August 11 $148 call options, where the open interest, volume and tighter spread make it an easy play. This is another planned trade, looking for another hit-and-run move to net another 10 percent; while I’d be willing to hold this as a swing trade, it won’t be for too long as I never hold through earnings and Home Depot reports in a few weeks.
Davis Martin is the head trader at DailyProfitMachine.com. He trades SPY Calls and Puts and swing trades mid-large cap stocks and stock options. He traded HD calls for the first time on Tuesday; at the time this article was published, he had no shares, options or open orders in HD, but was looking to play call options again as described in this commentary.