Target (NYSE: TGT - option chain) shares are rising today after the company said it expects its second-quarter profit to meet or beat analysts' forecasts, despite reporting June same store sales that fell 6.2% year-over-year. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TGT.TGT opened this morning at $38.96. So far today the stock has hit a low of $38.47 and a high of $39.30. As of 11:35, TGT is trading at $38.67 up $1.41 (3.8%). The chart for TGT looks bullish and S&P gives TGT a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider an August bull-put credit spread below the $34 range. A bull-put credit spread is an options position that combines the purchase and sale of put 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 a 16.3% return in just six weeks as long as TGT is above $34 at August expiration. Target would have to fall by more than 12% before we would start to lose money. Learn more about this type of trade here.
TGT has not been below $34 since April Fool's Day and has shown support around $36 recently.
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.
Why is gold marching higher? Ask the central bankers
Newspaper ad revenue of 28%, 8 quarters of double-digit drops
Closing Bell: Earnings working against stocks (BCRX, DELL, DHI, INTC, LEAP, PCS)
Reader Comments (Page 1 of 1)
7-10-2009 @ 6:02AM
NOS2001 said...
can't and won't whop target.... i still remember a few years back when they kicked the salvation army bellringers off the front of their stores... we have not stepped in one of their stores since... we know a lot of people who still remember what they did.