One of the concerns for advanced high strength steels (AHSS) in stamping operations is the failure of sheared edges in stretching modes. When a forming operation requires stretching edges, local formability becomes a very important factor of the material application, particularly for the AHSS. The local formability of a material is usually characterized by the hole expansion ratio (HER). During edge stretching, the sheared edge can be in contact with the tool or it can be free. These two conditions can be simulated by the hole expansion (HE) test using a conical punch and a flat bottom punch, respectively. In this study, the local formability of a dual phase (DP) 780 steel is evaluated using the HE test. The hole expansion tests were performed using a digital record and measurement system (DRMS) which allows the measurement of the final diameter of the hole at the moment of a localized fracture or a through-thickness crack at the hole edge. Two different configurations of the punch a conical punch and a flat bottom punch are used to study the plastic deformation of punched hole in stretching. The surface strain distribution at the shear edge (SE) and at the shear affected zone (SAZ) for the hole expansion specimens are then measured using the Grid Analyzer (GA) equipment. Incremental stretching in the HE test demonstrates that the plastic deformation of the sheared edge has preferential flow directions and the plastic deformation behavior of the analyzed material is independent of the burr orientation (up or down). Strain partitioning and fracture localization is mainly developed at high angle grids that correspond with strains applied in direction close to the transversal direction. It is found that the overall performance of DP 780 sheared edges is highly dependent on the stress directionality, the tooling configuration and testing conditions. For failure predictions of sheared edges in stretching, the computer simulation software should incorporate both the real plastic deformation behavior and stretch performance of different groups of grid elements as presented in this work.