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Trader bets on new all-time highs for Home Depot

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Home Depot has soared more than 8 percent since the election, but according to Todd Gordon of TradingAnalysis.com, another big bounce is on the way.

"We just saw some existing home sales data that was the best since February 2007, just before the stock market collapse based on the housing market," Gordon said Wednesday on CNBC's "Trading Nation." "So a company like Home Depot should certainly benefit from this housing market."

Based on this, while the home-improvement retailer has been "contained" and unable to break through the $135 level, Gordon sees the stock breaking through as high as $140.

This means that Gordon isn't just betting on a 3 percent bounce for Home Depot, but also that the homebuilder will make new all-time highs in the new year.


To cash in on the possibility, Gordon is looking to buy the February 135-strike calls and sell the February 140-strike calls for $2.15 per share, or $215 per options spread. This means that Gordon is betting that Home Depot could close above $140 on Feb. 17 expiration, which would net him a maximum reward of $285.

Essentially, Gordon would make money so long as Home Depot closes above $137.15, the trade's breakeven level, on Feb. 17. And the trader could more than double his money if Home Depot closes above $140. But if the stock falls back below $135, the entire cost of the trade will be lost.

Trader takeaway: Todd Gordon is betting that Home Depot could make all-time highs and break through the $140 level, so he is buying the February 135/140 call spread for $2.15.