Target (TGT) are releasing earnings tomorrow morning before market open.
The stock has been in a downtrend for the past 9 months and volatility is relatively high for the Feb 26 expiration; trading at 54%.
I expect the trend to continue and with implied volatility being high I will enter a trade that attempts a play on both; a short call spread. I am betting that volatility will decrease as well as the market price to decline.
I sold the $74/$74.50 call spread for $18 credit per contract, and again, a massive 2 lots!
Here is the payoff profile:
Here are the option closing prices for Monday's session that I based the order price from and my order confirmation screen:
Updates to follow...
Update February 26th
TGT released strong earnings and the stock shot up well and never made it back below the upper break even point:
The trade was a loss, losing $66.60. Here are the closing values of the trades:
|TGT Short Call Spread|
|TGT Feb26 $74.50 Call||2||0.886||3.93||608.8|
|TGT Feb26 $74.00 Call||-2||1.053||4.43||-675.4|