Home Depot Stock Red-Hot as Earnings Loom

Home Depot Inc (NYSE:HD) is up 2.83% to trade at $407.22 today, enjoying a price-target hike to $433 from $417. The shares have used a 10.9% quarterly gain to break into the black year to date, and the timing of the hot streak couldn't be better. The retailer reports second-quarter earnings before the market closes next week on Tuesday, Aug. 19. Ahead of the event, options traders are betting on the good times to keep rolling.

However, trader beware: Home Depot has a rather tepid post-earnings history. The stock averages a post-earnings move of only 1.5% -- regardless of direction -- the day after the last two years' worth of quarterly reports. However, five of those eight reports have been moves to the upside, including a 2.8% gain back in February. For Tuesday's trading, the options market is pricing in a much larger than usual post-earnings move of 4.9%.

Calls have been the preferred choice for some time, per HD's 50-day call/put volume ratio of 2.11 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands above 98% of readings from the past 12 months.

For now, even with earnings looming, premium is affordably priced. Options traders are pricing in relatively low volatility expectations, per HD's Schaefer's Volatility Index (SVI) of 23% that sits in the13th percentile of readings from the past 12 months.