Each week, I’ll give an overview of a stock and Licia Leslie will follow that up with a chart analysis the next day. Bill Griffo will chime in with macro analysis and Andrew Giovinazzi will then finish out the week with a volatility breakdown.

Have a stock YOU want us to review? Email my team here. – Mark

Hey Traders,

Target Corp (Ticker: TGT) was known for splashing ads and clever marketing, but got bogged down by some bad press and slumping sales over the last year. 

As Griff pointed out yesterday, they face stiff competition … but as a trade it might not be too bad.

TGT pays a $1.00 dividend per quarter, so a combination strategy might work for investors looking to up their yield. The volatility isn’t in a too hot or too cold area.

2 year chart of 180 day implied volatility in TGT

Let’s see what to do with it.

TGT Implied Volatility Is In The Middle of the Range

In general, I find that mid-tier vol levels make poor call purchases unless there is a hot axe to grind

I don’t see that with TGT. Call spreads can take the vega cost down tremendously though.

I think retail will remain soft for the rest of the year, and TGT is trading around the bottom of the range.

The TGT Jan2024 140 puts are around $9. That’s a yield of 6.4% for the next 7 months, so not terrible on an annualized basis.

TGT has been raising dividends for years and, in general, is a solid retailer that lost some of its magic just post-COVID as rates went up.

A short put or put spread would make a good entry point. As with any put sale, be ready to take stock if necessary.

To Your Trading Success,

AG