Traders Wager on Home Depot and Norfolk
NEW YORK--The options market was alive with "put" sellers Monday, as traders bet shares of Home Depot Inc. and Norfolk Southern Corp. can each hold strong 2011 gains into early next year.</br></br>Options sellers drove unusually heavy activity in both stocks Monday. In each case, large, single trades accounted for the bulk of the session's volume. In Home Depot's options, a trader sold a large batch of January $39 put options to establish a new position. At the same time, the trader unwound an equal number of January $30 puts, ratcheting up the wager.</br></br>The trader, who sold January $39 puts for 53 cents apiece, collected about $1.1 million from the transaction. That money can be kept should Home Depot's shares maintain their recent gains and close above $39 when the options expire in the middle of January. Home Depot's stock fell 22 cents, or 0.5%, to close Monday at $40.20.</br></br>Puts convey the right to sell the underlying stock for a set price by a fixed expiration. Buyers of puts generally profit from stock declines. Put sellers, on the other hand, pocket premiums should the stock expire above the strike price. At the same time, put sellers could be on the hook to purchase stock if the price declines below the exercise price.</br></br>"Basically, the trader is making a bet on the overall economy," said TD Ameritrade chief derivatives strategist Joe Kinahan. Mr. Kinahan noted this week is full of November housing data that could provide some short-term fuel for Home Depot's stock. November readings on U.S. housing starts and building permits are due Tuesday, while existing-home sales data are scheduled for a Wednesday release.