Target Earnings Miss Sets Bearish Tone on Wall Street

Target call options were popular in recent weeks

by Josh Selway

Published on Nov 20, 2018 at 9:11 AM

Things have been pretty ugly for stocks in recent weeks, and today's shaping up no different. Futures on the major U.S. indexes are below fair value, and one of the biggest stories is a disappointing third-quarter earnings report from Target Corporation (NYSE:TGT). Profit and same-store sales for the period both came up short of expectations, despite a 49% increase in digital sales.

TGT stock is now pacing to open down 11.9% at $68.50, territory not charted since May. The shares had already been struggling coming into today, too, down almost 12% during the quarter. In fact, yesterday they closed below their 200-day moving average for the first time in a year.

As for recent options activity, traders were picking up long call options before earnings. TGT sports a 10-day call/put volume ratio of 1.65 across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), showing that call buying has easily surpassed put buying during the past two weeks.

Elsewhere, however, some traders were betting on a pullback in Target. Specifically, short interest rose by 13% in the last reporting period, and now represents more than 5% of the total float. Today's quarterly results could encourage these skeptics, which would be another headwind for the stock.

 


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