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Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

The Cherry Bomb
May 23, 2019

Talk about a black swan. As we enter into the prime season for home improvement, LOW dropped the equivalent of 5.9 standard devs yesterday as the market obviously didn’t find what it was looking for in its earnings numbers.  Competitor HD announced on Tuesday, but it fared much better, actually rallying on its numbers and falling a paltry 1 standard dev along with the broader market yesterday.  Apparently the duct tape and screen doors at the orange place are better than those at the blue place.  I can’t disagree, though.  When I need 25 sheets of ¾” treated plywood (don’t ask) HD is my go-to store.  HD has dropped over 8% in the last month.  If you were thinking that HD might rally in the summer months, a bull might see an opportunity.  The 21% IV rank suggests debit spreads for a speculative strategy.  If you are bullish on HD, the long call vertical that’s long the 185 call and short the 190 call in the July expiration with 57 DTE is a bullish strategy that has a 65% prob of making 50% of its max profit before expiry and that generates $.09 of positive daily theta.
 

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Tom Sosnoff
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