Trader bets on more gains for a soaring retail stock

A large volume of bullish bets in the options pits has one trader jumping on the Home Depot train.

On Wednesday, a trader appeared to buy nearly a large number of call contracts on the home improvement retailer, in an apparent expectation that the stock will rise by more than 9 percent by mid-February.

In the eyes of options trader Andrew Keene, such bullish bets make sense, especially when you look at charts of the homebuilding retailer. The weekly chart shows that the stock is in a "straight bull channel" that will continue to take the stock higher, he said.

"As long as it can get through this 50-day moving average, which is resistance, the next level is $138," Keene said Thursday on CNBC's "Trading Nation."

To play for such a move, Keene is placing his own options trade. He opts to buy the February 135-strike calls and sell the February 140-strike calls for a total of $1.40 per share, or $140 per options spread. This means that Keene is risking $140, and will more than triple his money should Home Depot close above $140 at February expiration.

Home Depot is currently down 2 percent year to date, even after an 8 percent rise in the past month.

Trader takeaway: Andrew Keene is betting on a continued rise for Home Depot by buying the February 135/140 bull call spread for $1.40 per share.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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