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Target Bears Take Profits

More than a few option traders are likely celebrating TGT's drop

by 11/29/2012 11:13 AM
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The shares of Target Corporation (NYSE:TGT - 61.88) are bucking the broad-market trend higher this morning, and it seems some option bears are cashing in their chips. So far today, the retailer has seen roughly 6,500 puts cross the tape -- about six times its average intraday put volume, and more than double the number of TGT calls exchanged.

Most popular has been the December 62.50 put, which has seen more than 2,500 contracts change hands -- mostly at the bid price, hinting at seller-driven volume. Considering these puts moved into the money right out of the gate this morning, when TGT fell as low as $61.19, we can assume that a healthy portion of the activity consists of profit-taking.

And speaking of option bears... There are plenty likely celebrating TGT's early dip. The stock's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 1.40, in the 87th percentile of its annual range. In other words, option buyers have picked up TGT puts over calls at a much faster-than-usual pace during the past couple of weeks.

As such, the security's Schaeffer's put/call open interest ratio (SOIR) has ascended to 1.19, just eight percentage points from a 52-week peak. Or, in simpler terms, short-term options players have rarely been more put-heavy during the past year.

At last look, the shares of TGT have trimmed a portion of their losses, but are still down 1.5% to explore the $61.88 level. This morning, the retailer confessed to a surprise drop in November sales, as Hurricane Sandy shuttered stores in the Northeast. Specifically, same-store sales fell 1% in the crucial Black Friday month, defying expectations for a 2.1% rise.


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