TGT Analysis

Target Corp. (TGT)

Update 8/16/2017: TGT’s earnings came in a $1.23, slightly below the $1.28 consensus expectation by analysts. The share price whipsawed in pre-open trading but immediately after the opening bell was close to where it had closed the day before. I exited with the share price at $55.57 and the options position at a debit of $1.97, or 24.8% of maximum potential profit.

Shares rose by a net 0.5% over my one-day holding period, or a +172% annual rate. The options position produced a +32.1% return for a +12,043% annual rate.

Zacks Investment Research had given TGT an earnings surprise predictor of zero, suggesting a small move that would be more likely to stay within the profit zone, and that’s how it played out.

TGT publishes earnings on Wednesday before the opening bell.

I shall use options that trade for the last time 10 days hence, on Aug. 25.

Implied volatility stands at 30%, which is 2.5 times the VIX, a measure of the volatility of the S&P 500 index.

TGT’s IV stands in the 83rd percentile of its annual range and the 78th percentile of its most recent broad movement.

The price used for analysis was $55.14.

Premium: $2.62 Expire OTM  
TGT-iron fly Strike Odds Delta
Long 60.00 90.0% 11
Break-even 57.62 ~73.9% ~29
Short 55.00 49.0% 54
Short 55.00 51.2% 46
Break-even 52.62 ~74.6% ~23
Long 50.00 88.9% 10

The premium is 52% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

The expected move is $2.40, within the $2.50 break-even width.

Decision for My Account

I have entered an order on TGT as described above. The stock at the time of entry was priced at $55.31.

By Tim Bovee, Portland, Oregon, Aug. 15, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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