TGT: Right on, Target
Target (TGT) is on the rise again today, and the options action is looking for more room to run.
Target is up 5.6% on the session to $37, approaching its high of last Friday. The stock has been in an amazing uptrend since bottoming at $25 back on March 6 and is now back at levels last seen in early January.
There's considerable options activity in the name this morning, with 4 of the top 10 largest trades of the day in Target (albeit, on a low-volume day). There's a large call spread involving 20,000 each of the April 32.50 and 30 calls, but this in-the-money spread appears to be the closing of a previous position.
More interesting is the combination of the April 34 puts and 37.5 calls. Both traded 7,466 contracts at the same time, and now volume is above 13,000 at each strike. The trade appears to be bullish, selling those puts for $0.43 and buying the calls for $0.59, for a net debit of $0.16.
This debit is the risk as long as the stock stays above $34, which is clearly the view of this trader. Above $37.50, the position will gain dollar for dollar with the stock for a highly leveraged trade.
Normally, it would be hard to tell if the call buying was opening or closing positions, with the volume less than the open interest on this side. But as this went off as 1 trade, and the put volume was more than open interest, it's logical that it's 1 new opening strategy.
The implied volatility currently for those puts is 54% and for the calls is 47%.
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