Honeywell (HON) Stock Forecast 2025: Option Traders Brace for Potential Reversal at $220-$230 Range

Increasing Open Interest in Put Options Signals Caution

Investors have driven up Honeywell International Inc. (HON) stock prices as anticipation builds for the company's upcoming fiscal second-quarter earnings release. Despite this optimism, a notable rise in out-of-the-money put options within open interest suggests that option traders are preparing for a potential downward price movement. This unusual surge in option activity could lead to a significant decline in HON's stock if the earnings report disappoints.

A substantial accumulation of put options is evident, accompanied by elevated option premiums. Recent trading volumes reveal a trend of call selling and put buying, reflecting bearish sentiment ahead of the earnings announcement. Should these bearish positions unwind unexpectedly, there could be upward pressure on HON’s share price.

While predicting post-earnings stock direction remains challenging, a comparative analysis of stock price and option trading patterns indicates that a positive earnings surprise could propel HON shares well above their 20-day moving average shortly after the announcement. This potential rise stems from options being priced for minimal movement, leaving room for rapid gains if favorable news emerges.

Key Insights

• Honeywell shares have rallied ahead of the earnings report.
• The stock recently surpassed its 20-day moving average, signaling bullish momentum.
• Option pricing currently suggests a stronger likelihood of a downward move.
• Volatility-based support and resistance levels indicate room for price movement in either direction, with a bias toward downside.
• This environment presents traders with opportunities to capitalize on unexpected earnings outcomes.

Option trading reflects investor strategies to hedge positions or speculate on stock price movements, essentially betting on market probabilities. By examining both stock and option price behaviors, analysts can glean valuable insights into market expectations, especially when contextualized with technical indicators. The chart below illustrates HON’s price action leading up to the earnings report.

Current Market Trends

Over the last month, HON shares have fluctuated between approximately $215 and $232, closing near the midpoint of this range. These movements correspond with the 20-day Keltner Channel indicators, which use the Average True Range (ATR) to highlight price volatility boundaries. This range-bound behavior suggests investors are cautiously optimistic about upcoming earnings.

Technical Tip

The Average True Range (ATR) is a widely-used metric for measuring historical volatility, typically calculated over 10 to 20 trading periods, encompassing two to four weeks. This tool helps traders assess price fluctuations and potential breakout points.

With HON’s price trending toward the upper boundary of its recent range, market participants appear confident heading into earnings. The stock’s close above the 20-day moving average reinforces this positive sentiment. However, it remains crucial to determine whether this price action truly reflects expectations for a strong earnings report.

Option activity offers further clues: a noticeable preference for put options over calls suggests that some investors anticipate disappointing results. This bearish bias underscores the potential for significant price movement post-announcement.

Additional Technical Insight

The Keltner Channel, constructed using a 20-day simple moving average and ATR multiples, provides a clear visual of support and resistance zones by creating semi-parallel lines around price action. This indicator is invaluable for interpreting historical volatility trends.

Option Trading Dynamics

Option traders are pricing HON shares with the expectation that the stock will close within defined price ranges between now and July 23, shortly after the earnings release. The green box on the chart represents call option pricing, indicating a 34% probability that shares will close higher within this range. Conversely, the red box reflects put option pricing, suggesting a 40% chance of a lower close.

Open interest data shows approximately 54,000 call options versus 44,000 put options, indicating a slight bullish tilt among option buyers. The near parity between calls and puts implies uncertainty among traders regarding a significant price jump in either direction. This balanced outlook points to a cautious market environment.

The purple lines on the chart, derived from a 10-day Keltner Channel set at four times the ATR, highlight key support and resistance levels formed over the past three months. These levels reveal a wider potential downside move compared to the upside, reflecting cautious sentiment despite call option purchases.

This configuration suggests that while investors do not anticipate dramatic earnings surprises, any unexpected news could trigger sharp price swings in either direction.

Support and resistance zones encompass a broad price range, indicating the potential for significant volatility following the earnings report. Previously, HON shares dropped 2.8% on earnings day and continued declining the following week. This time, investors may be bracing for a different trajectory, with greater room for downward movement toward the 20-day moving average.

Broader Market Implications

Given HON’s history of notable post-earnings price swings, the upcoming report could influence broader market indices and the industrial sector. A positive earnings surprise might boost stocks like The Boeing Company (BA), General Electric Company (GE), and 3M Company (MMM), as well as sector-focused ETFs such as the Industrial Select Sector SPDR Fund (XLI) and the S&P 500 ETF Trust (SPY).

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