$HON Options Intelligence

🎯 SELL HON DEC 05 220 CALL, BUY HON DEC 05 230 CALL (Bull Call Spread)

I recommend a bull call spread with strikes 220/230 expiring December 5, 2025, because the term structure shows near-term options (Dec 5) have elevated implied volatility (IV ~70.2%, clean IV 70.2%) well above the baseline 90-day historical volatility of 24.9%, indicating options are overpriced and favor selling premium. However, the December 5 expiration is still before the next earnings on February 5, 2026, so this trade captures a directional bullish view without earnings risk. Honeywell is trading near $199.23, below its 50-day ($206.65) and 200-day ($214.50) moving averages, but recent positive news about its collaboration with TAT Technologies suggests potential upside catalysts. The stock is slightly oversold with RSI 43.72 and MACD turning bullish, supporting a moderately bullish directional trade.

Trade Details:

• Stock Price: $199.23
• Expiration: December 5, 2025 (18 days)
• Buy 1 HON Dec 05 220 Call (IV ~70.2%) at ask price ~ $4.00 (estimate based on IV and typical spread)
• Sell 1 HON Dec 05 230 Call (IV ~70.2%) at bid price ~ $1.50 (estimate)
• Net Debit: Approx. $2.50

📊 Trade Metrics

• Max Risk: $250 per spread (net debit)
• Max Reward: $750 (difference between strikes $10 minus debit $2.50)
• Breakeven: $222.50 (strike 220 + $2.50 debit)
• Win Rate: Moderate, as stock needs to rise above $222.50 by expiration
• Days to Expiration: 18

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 24.9%
• Dec 5 Clean IV: 70.2% (significantly above baseline, options overpriced)
• IV Rank: 100% (strongly favors selling premium)
• Expected Daily Move: ±$4.33 (2.17%)
• Calendar Opportunity: Dec 5 IV is very high vs later expirations (e.g., Dec 12 IV 24%) indicating a good short-term premium sell opportunity
• Earnings Date: Feb 5, 2026 (trade expires well before earnings, avoiding event risk)

📈 Greeks & Volatility

• Delta: Dec 5 220 Call approx. 0.25-0.30 (moderate bullish exposure)
• Theta: High negative theta on short leg aids premium decay
• Vega: Positive on long call, negative on short call; net vega slightly negative, benefits if IV drops from high levels

🎯 Why This Trade

The term structure shows a strong premium in near-term options (Dec 5 IV 70.2% vs baseline 24.9%), making selling short-term premium attractive. Honeywell's recent institutional selling and stock price below key moving averages suggest limited immediate upside, but the collaboration with TAT Technologies and bullish MACD signal a potential rebound. Selling the 230 call caps upside but reduces risk, while buying the 220 call limits max loss to the debit paid. This spread benefits from time decay and potential IV contraction while giving moderate exposure to a bullish move above $222.50. The trade avoids earnings risk by expiring before the Feb 5 earnings date. The current price of $199.23 is well below the spread strikes, so the trade has room to profit if the stock rallies moderately.

📊 Pro Analysis

• Current IV: 34.5% average, but Dec 5 IV is elevated at 70.2% (overpriced short-term premium)
• RSI: 43.72 (neutral to slightly oversold)
• MACD: Bullish crossover (-2.75 vs signal -2.79)
• Dividend: $1.19 quarterly, ex-dividend Nov 14 (just passed)
• Sector Peers: Mixed institutional sentiment with recent selling pressure
• Market Maker Max Pain: $230 (near upper strike) indicating potential pinning zone

🔍 Earnings Date Check

Earnings on February 5, 2026. This trade expires December 5, 2025, well before earnings, avoiding earnings volatility risk.

💡 Trade Management

• Entry: Place limit order to buy 220 call near $4.00 ask and sell 230 call near $1.50 bid for ~ $2.50 debit
• Target: Close at $4.00+ (100% profit) if stock approaches or exceeds $225
• Stop: Exit if stock drops below $190 or if spread value declines below 50% of debit
• Time Stop: Close 2 days before expiration to avoid weekend risk

🔒 Pricing Validation

• 220 Call intrinsic value: Max(0, 199.23-220) = 0 (OTM)
• 230 Call intrinsic value: 0 (OTM)
• Spread intrinsic value: 0
• Debit spread cost > intrinsic value, respecting pricing rules

🔍 Market Overview

Honeywell is trading at $199.23, below its 50-day and 200-day MAs, showing a bearish intermediate trend but with technical signs of a potential short-term rebound (bullish MACD, RSI near neutral). The stock has seen institutional selling today, including Nomura and Slagle Financial, which may weigh on price. However, the recent partnership with TAT Technologies offers a positive catalyst for aerospace and tech segments. The market environment is cautious with high implied volatility in near-term options, favoring premium selling strategies. Dividends recently paid reduce immediate downside risk. Related industrial sector peers show mixed performance, with sector rotation impacting momentum. The Fed’s current stance and upcoming economic events suggest moderate volatility ahead, supporting defined-risk spreads over outright long calls.

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Confidence Level: Moderate. The trade balances premium selling with limited bullish exposure, capitalizing on elevated short-term IV and technical signals without earnings risk.

Risk Assessment: Limited to $250 max loss per spread. Profit capped at $750. Risk managed by defined debit spread and no earnings exposure. Potential downside if stock declines below $190 or IV rises further. Time decay and IV contraction expected to benefit position.