Lowe’s Options (LOW): Unusual Trading Activity
Options in home-improvement company Lowe’s (LOW) are showing quite a bit of volume today.
Although all of the three major indices are trading down again today, individual company earnings reports continue to come in positive.
Just this morning, Wal-Mart (WMT) beat analysts’ expectations and is trading up more than 5%.
In other words, all is not lost. The world isn’t going to end.
Now, let’s take a closer look at this activity and see what it means for options traders.
Monday morning mega cap company Lowe’s is scheduled to report earnings before the bell.
And the buzz in the market today is that option traders are positioning for a nice rise in the stock price.
This morning, a lone trader came in and sold 4,000 contracts of the LOW June $30 strike put options. He sold these contracts for an average price of $1.62 a share.
In doing so, he collected a staggering premium of $648,000.
Remember, put selling is a strategy where a trader is looking for a rise in the stock price above the options strike price. At expiration, when this occurs, he will profit by the entire amount of the premium.
In this case, this option trader needs LOW to close above $30 by June expiration and he’ll be $648,000 richer.
So obviously this guy is bullish on Lowe’s…
Lowe’s is the second largest home-improvement retailer in the world.
It operates about 1,750 stores throughout the US, Canada, and Mexico.
Their stores offer products and services for home decorating, maintenance, repair, and remodeling. Lowe’s targets retail do-it-yourself and do-it-for-me customers, as well as commercial business clients.
And here’s why I like the trade…
Despite the economic downturn, consumers are still spending on home maintenance and improvement projects as home sale trends have begun to tick up.
In addition, Lowe’s continues to invest in proprietary brands. And these brands garner higher margins and should contribute higher profits as sales rebound.
It all comes down to this…
Our option trader is betting on two things happening.
First, he’s expecting LOW will report strong earnings on Monday. Second, he’s expecting strong earnings will drive LOW’s stock price over $30 per share before his put options expire in June.
So, with earnings on the horizon, let’s see if this bold options trader has made the right call on the home improvement giant.
For more detailed information on unusual options activity and how you can profit from it, be sure to sign-up for our daily newsletter, Options Trading Research. It’s always 100% free and packed full of option trading ideas you can use immediately in your own portfolio. Click here to subscribe for free.
Category: Unusual Options Trading Activity
