Target Corp. (TGT)

Update 5/17/2017: TGT rose sharply after earnings were published and rapidly declined to near where it closed the day before, allowing for an exit at a debit of $2.07, or 31.1% of maximum potential profit.

Shares produced a net rise of 2.1% in a day, or a +757% annual rate. The options position produced a 45.2% yield on debit for a +16,478% annual rate.

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TGT publishes earnings on Wednesday before the opening bell.

I shall use the series of monthly options that trade for the last time 10 days hence, on May 26.

Implied volatility stands at 33%, which is 3.1 times the VIX, a measure of the volatility of the S&P 500 index.

TGT’s IV stands at the peak of both its annual range and the its most recent broad movement.

Note: The previously posted analysis was done on the monthlys grid expiring June 16. This trade, on the May 26 weeklys, provides a much improved result.

The price used for analysis was $54.61.

Premium:	$2.99	Expire OTM
TGT-iron fly	Strike	Odds	Delta
Long	60.50	91.7%	10
Break-even	57.49
Short	54.50	52.0%	51
Puts
Short	55.00	48.0%	49
Break-even	51.49
Long	48.50	91.9%	7

The premium is 48% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on TGT as described above. The price at the time of entry was $54.50

By Tim Bovee, Portland, Oregon, May 16, 2017