Home Depot LEAPs Higher

Home Depot’s (HD, $27.40, up $0.38) stock has managed to trade higher since the company announced earnings despite a choppy market. The company beat Wall Street’s estimates by 10 cents and the better-than-expected results have seen buyers start to come in.

The stock managed to hold the $25 level and did not trade down to the $20-$21 level like we were hoping for. Even some not-so-great economic news about the housing market hasn’t stopped Home Depot from drifting higher.

I mentioned how we needed to get into Home Depot before the market realized how cheap the stock was getting and we were targeting the January 2010 25 calls (WHDAE, $6.00, up $0.25). These call options are considered LEAPs and don’t expire for another 18 months. After Home Depot’s earnings the calls were trading for $5.00 so they are now up 20%. Although we were hoping to get in at $4, the calls never traded down to this level.

Home Depot has been making changes at the top and recently announced a dividend of 22.5 cents. For you dividend buffs, Home Depot’s is payable September 18 to shareholders of record September 4.

Sometimes entry points don’t work out as we plan and the train ends up leaving us. For those of you who may have boarded early, keep riding the train and set you stops at $5.75.

Rick Rouse
Rick@OptionsMentoring.com

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