Unusual Options Activity In Target

Amazon recently announcement of evolving their Prime free two-day shipping program to be a free one-day shipping program.  On the news, Target shares decline 5.7% on Friday.  On Monday, Target was upgraded by Barclays to overweight from equal-weight with a price target of $115, which represent a roughly 50% appreciation in the stock price.

“If we focus on the two categories TGT appears to have the most competitive advantages in , Apparel and Home Furnishings, we believe TGT has a minimum ~$140 billion sales opportunity for market share,” analyst Matthew McClintock wrote.

This market expansion should help the company overcome the margin pressure that fulfillment costs have placed on most retailers.

“[Target] has a much better strategic position related to this given it over-indexes on higher margin product categories, which it claims can offset the pressure. While we are skeptical of this, we believe that even if TGT continues to face pressure, it has a realistic opportunity to drive EBIT margin expansion from higher incremental margins related to market share gains,” McClintock said.

The firm also notes that Target is ahead of Amazon in the same day delivery space and that it has already built a supply chain that fulfills e-commerce primarily from its brick-and -mortar locations.

Source

If that was the case, why did the Smart Money buy a ton of the June 21^st put options with a $70 strike price yesterday?

Now I like Target, the stores are clean and lively, their commercials are a breath of fresh air, but I don’t think they can compete with Amazon.  They just started offering two day delivery this past Christmas Holiday Season. 

But it’s not about what I think, it’s all about the chart, so lets see where price is heading next.

Monthly Chart (Curve Timeframe) – monthly supply is at $89 and monthly demand is at $55.

Weekly Chart (Trend Timeframe) – the trend is sideways.

Daily Chart (Entry) – the chart suggests to go short/long price at the extremes…the monthly zones.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.