Huge, Unusual Volume In Long-Term Puts In Honeywell Shows Investors Are Bullish

Today, a large, unusual volume in very long-dated, deep out-of-the-money (OTM) put options traded in Honeywell International (HON). Investors are bullish on HON stock, especially given management's FCF guidance released yesterday.

HON is trading at $213.31 in midday trading, up slightly. However, since the end of May, HON stock has dropped from a peak of $237.86 on May 29. It could have good upside based on what management said yesterday.

HON stock - last 3 months - Barchart - As of June 9, 2026

Honeywell International plans on spinning off its space division at the end of June. As a result, management has issued guidance on what earnings to expect this year. In fact, they announced a free cash flow (FCF) target range yesterday. 

This is largely unprecedented for most companies. As a result, it allows the market to value the remaining portion of the Honeywell International stock that is not spun off.

That could also be why there is such a huge volume of deep, out-of-the-money, long-dated put options today.

Unusual HON Put Option Volume Today

This can be seen in today's Barchart Unusual Stock Options Activity Report. It shows that over 3,100 HON put contracts have traded for expiration on Jan. 21, 2028, which is 591 days from now (i.e., over 1.6 years from now, about 19.4 months in the future).

Moreover, the strike price is at $170.00 per share, over 20.3% below today's price of $213.31. That means the initiators of these puts, likely short-sellers, won't have an obligation to buy HON stock unless it falls by over 20%.

HON puts expiring Jan. 21, 2028 - Barchart Unusual Stock Options Activity Report - June 9, 2026

In return, these short-sellers earn an immediate income of $12.15 at the bid-ask midpoint. That represents a year and a half+ yield of 7.147% (i.e., $12.15/$170). That works out to a monthly yield of 0.368% and an annualized rate of 4.42%.

That is an attractive return for institutional investors for their unused cash. Moreover, it allows them to potentially buy into HON at a much lower stock price, in case it drops to $170 by Jan. 21, 2028:

  $170 - $12.15 = $157.85 breakeven

  $157.85 / $213.31 -1 = -26% below today's price

That gives them the ability to buy HON at a 26% discount and get paid 4.42% annually (upfront) while waiting.

So, why would they do this? Let's look at Honeywell's fair value.

Valuing Honeywell International

Yesterday, management released its guidance that it expects to make sales of between $38.8 billion and $39.9 billion this year, post-spinoff. Moreover, quite untypical for many companies, it provided a free cash flow (FCF) range of between $5.3 billion and $5.6 billion.

That means that its expected FCF margin will be 13.9% at the midpoints of both ranges:

  $5.45b FCF / $39.3b FY 26 revenue = 13.9%

Moreover, that included some one-time litigation charges which won't be repeated, so we can use a 14% FCF margin average for forecasting purposes.

For example, next year, analysts are expecting $41.76 billion in revenue for 2027. So, using a 14% FCF margin, investors can project $5.85 billion FCF next year:

  $41.76b x 0.14 = $5.8464 billion FCF FY 2027

That is $400 million higher than the FY 2026 midpoint range, or 7.3% higher.

Price Targets for HON Stock

Moreover, given Honeywell's existing $136.1 billion market cap, its expected FCF yield for this year is 4.0%:

  $5.45b / $136.1b = 0.04

So, for FY 2027, the projected market value is over $146 billion:

  $5.85b / 0.04 = $146.25 billion

That is $10 billion higher, i.e., 7.5% over its present market cap. As a result, the price target for HON stock is over $229 per share:

  $213.31 x 1.075 = $229.31

So, no wonder investors today are willing to sell short deep out-of-the-money (OTM) put options in a long-dated expiry period, as shown above.

As a result, this is an excellent way to play HON stock, given its higher fair value.

The bottom line is that HON stock looks undervalued here, and shorting OTM puts is one way to play it. 

Moreover, the income earned could also be used to buy in-the-money (ITM) long-dated call options. That way, an investor can benefit from any upside in Honeywell International.