Lowe's Draws Call-Buyers Ahead of Earnings

By Jon "DRJ" Najarian, co-founder of OptionMonster

The stock closed the Friday session up 1.8% to $21.85 and rose to $22.05 in after-hours trading, more than 68% above its March lows. The home-improvement retailer was up near its 52-week high of about $24 in mid-August but plunged after lowering guidance for the third quarter, and the stock has been range-bound between about $19.50 and $22 since then.

Friday's option activity was concentrated at the November 23 strike, at which 20,572 calls changed hands in a strong buying pattern. That was almost triple the previous open interest of 6,998 contracts and dwarfed the average volume of just 179 calls a day at the strike.

Most of the calls went for 20 cents to 40 cents, according to OptionMonster's proprietary tracking systems, and overall calls at all strikes outnumbered puts by nearly 3 to 1. For the November 23 calls to turn a profit, Lowe's stock will need to rise between 6% and 7% at minimum by expiration at the end of this week.

Analysts expect earnings to come in at 24 cents a share on revenue of $11.28 billion. The stock is always a focus of interest, but it may be even more so Monday because it is the only S&P 500 name reporting.

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