Puts Popular Ahead of Target's Earnings Report

Target will step into the earnings confessional before the open tomorrow

Deputy Editor
Nov 19, 2019 at 2:56 PM
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After yesterday's session put Target Corporation (NYSE:TGT) right back within striking distance of its late-October all-time peak, the shares of the retailer are cooling off today, as investors gear up for the firm's third-quarter earnings report -- due out after the close tomorrow. It's been an impressive run for Target this year, with two massive post-earnings bull gaps propelling the equity straight up the charts. And while it has been bumping up against the $114 region in recent weeks, the ascending 60-day moving average has provided solid support for the stock's climb. 

TGT chart Nov 19

As previously mentioned, TGT managed to clock 20.4% and 7.8% wins during its last two post-earnings sessions, respectively. Looking at the past two years, the security enjoyed next-day moves higher half the time, averaging an 8.3% swing, regardless of direction. This time around the options pits are pricing in an 11.5% move. 

Speaking of, options traders have picked up the pace today, with 39,000 calls and 40,000 puts on the tape so far -- three times what's typically seen at this point. The April 90 put is getting a lot of attention today, followed by the December 120 call and the weekly 11/29 110-strike call, with positions being opened at the latter. 

More broadly, a penchant for bearish bets has been the norm of late -- though some of this could be shareholders protecting paper profits following the security's recent positive price action and 67% year-to-date gain. While TGT's 50-day put/call volume ratio of 0.70 indicates that calls still outnumber puts, the ratio sits higher than 78% of all other readings from the past year, meaning the rate of put buying relative to call buying has been quicker than usual. 

Put options expiring within the next three months have been incredibly popular, too. TGT's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.27, and ranks in the 92nd percentile of its annual range. Should the retail stock continue to shine on the charts, an unwinding of the hedges related to these bets could create even bigger tailwinds for Target.

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