Target (NYSE: TGT - option chain) shares are falling today after the company reported a 4.8 percent decline in October same-store sales this morning, worse than the 2.8 percent predicted by analysts. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TGT.This morning, TGT opened at $37.11. So far today the stock has hit a low of $36.74 and a high of $39.11. As of 12:25, TGT is trading at $36.77, down 98 cents (2.6%). The chart for TGT looks neutral and S&P gives TGT a 3 STARS (out of 5) hold ranking.
For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $45 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in two weeks as long as TGT is below $45 at November expiration. Target would have to rise by more than 22% before we would start to lose money. Learn more about this type of trade here.
TGT has been above $45 as recently as early October but has fallen sharply since and shown resistance around $42 over the past month.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in TGT.
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