Market News

December 19, 2012  Wed 4:45 AM CT

Home Depot has pulled back since starting the month at its high for the year, and one trader is positioning for more potential losses.

More than 5,600 February 60 puts traded in a strong buying pattern yesterday, led by a single print of 3,979 that went for $0.97. The volume was 4 times higher than the strike's open interest of 1,432 contracts at the beginning of the day, indicating these are new purchases.

The option activity wasn't tied to any stock trades identified by our systems yesterday, but the puts could have been bought to protect a long position established earlier. If not, they are making a straight bearish bet that HD will fall roughly 3 percent by expiration on Feb. 15, 11 days before the company reports fourth-quarter earnings. (See our Education section)

HD slipped 0.49 percent yesterday to close at $63 even. Shares of the home-improvement retailer began December by hitting a 52-week high just shy of $66 but then began to falter, though they are still up 50 percent since starting the year around $42.
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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