Mike Khouw's Home Depot Options Trade

On CNBC's Options Action, Mike Khouw suggested that traders should consider a bullish options strategy in Home Depot Inc HD. He thinks it might trade higher on hopes about improvement in the U.S. economy.

Khouw would sell the December 120 put for $1.10, buy the December 130 call for $3.00 and sell the December 135 call for 1.15. The structure is called a risk reversal call spread and it would cost him $0.75. He would make money if Home Depot trades above $130.75. The trade can maximally make $4.25, if the stock traders to $135 or higher. Below $120, he would have to own the stock at $120.