This morning I sold my call options in Home Depot stock. You can view the original trade through this link and go to Oct 31 in the table. With the stock remaining under some pressure I decided to sell the call options for a profit of $741 on an investment of $2039.50. Don’t let the returns fool you though, I expected more out of this call option trade and while I certainly shouldn’t complain I did expect that Home Depot stock would push higher. Nonetheless this is what investing is all about and a profit is a profit. I sold my calls this morning and the trade is closed.
Home Depot Stock Naked Puts Still Held
I am still holding the Home Depot Stock naked puts at the Nov 17 $60 strike which I sold for .82 cents on October 31. Presently these puts are trading for around .40 cents as Home Depot stock while under selling pressure is still in an uptrend until the 50 day moving average breaks on the 3 month charts. That has not yet happened and I am hoping to close these puts for 5 or 10 cents.
Home Depot Stock Watch
I have watched Home Depot Stock carefully over the past few weeks. You can see how on Oct 26 2012 Home Depot Stock moved down to the 50 day moving average on the chart below. While definitely not uncommon for Home Depot Stock or any stock to pullback to the 50 day moving average there is a possibility of a double top forming which could signal the end of this great rally in the stock. Now up 71% since Nov 25 when it was at $36.47, eventually this rally will end in Home Depot Stock. I don’t want to be around for when that happens.
I will be watching closely for the typical double top and then the pullback to get out of my Nov 17 2012 naked puts. With just a couple of weeks left I will keep a careful watch. For investors who are owning this stock and love it I would consider in the money covered calls. I will have an article up on the members section this evening looking at how to position long-term stock holders for Home Depot Stock pulling back. As any long-term stock holder knows, it is not fun watching your stock give up its gains. In the money covered calls provide the opportunity to protect a lot of those gains already made in Home Depot Stock.