Target Corp. (TGT)
Update 4/22/2017: TGT gapped down sharply after earnings were published and then continued to decline at a less dramatic pace, moving deeper into unprofitable territory.
I was less nimble than I ought to have been for a position with some options deep in the money, and the short puts were assigned on March 20. I exited the shares the next day, and also sold the long puts, leaving a deep out of the money short call spread, which expired April 22, winding up the entire position.
Over the 54-day life of the position shares had a net decline of 17.9%, or a -121% annual rate. The options position produced a 4.2% loss on debit for a -28.4% annual rate
TGT publishes earnings on Tuesday before the opening bell.
I shall use the APR series of options, which trades for the last time 53 days hence, on April 21.
Implied volatility stands at 27%, which is 2.3 times the VIX, a measure of the volatility of the S&P 500 index.
TGT’s IV stands in the 69th percentile of its annual range and the 79th percentile of its most recent broad movement.
The price used for analysis was $66.76.
|Premium:||$4.44||Expire OTM||iron fly|
The premium is 51% of the width of the position’s wings.
The risk/reward ratio is 1.2:1.
Decision for My Account
I have entered a position on TGT as described above. The stock at the time of entry was priced at $68.72.
By Tim Bovee, Portland, Oregon, Feb. 27, 2017