Lowe's Sinks, Analysts Take on Home Depot Stock

Weekly options traders targeted HD's post-earnings action

Lowe's Companies, Inc. (NYSE:LOW) is set for a large sell-off after the company reported quarterly earnings that were below analysts' expectations. On top of that, the retailer lowered its full-year profit forecast. Shortly before the open, LOW shares were down 8.5%, which would put them at $101.68, back below the 200-day moving average.

The options market was pricing in a 7.4% swing for Lowe's today, with traders building large positions at the weekly 111-strike call over the past 10 days. Taking a broader view, peak open interest of 20,131 resides at the October 100 call, compared to just 4,191 contracts at the second most popular contract.

Meanwhile, Wall Street continues to weigh in on LOW rival Home Depot Inc (NYSE:HD), after the company's disappointing same-store sales update on Tuesday. RBC cut its price target to $213 from $217, and J.P. Morgan Securities edged its price target up to $204 from $203. The average price target among the brokerage crowd stands at $206.90.

Despite the weak start to yesterday's session, HD shares actually closed in positive territory near intraday highs, seeming to find support at the 200-day moving average to close at $191.45. As for options activity, near-term speculators moved in on the retailer during yesterday's volatility, with new positions opening at the weekly 5/24 185 and 190 puts.