Options Trading News

August 10, 2012  Fri 12:23 PM CT

A trader is doubling up on a bullish bet in Target ahead of its earnings report next week.

optionMONSTER's Heat Seeker system detected the sale of 2,000 August 62.50 calls for $0.71 against open interest of 6,021 contracts and the purchase of 4,000 September 65 calls for $0.41 against open interest of 660, according to optionMONSTER's Heat Seeker system.

Both trades were completed at the same second. The calls were below open interest in the August options but not the September contracts, indicating that a trader was closing the front-month position and rolling it forward.

In addition to getting more time for the upside strategy to work, the trader doubled the number of long calls and bought a higher strike price, indicating an increasingly bullish bias. The premium collected from the August call sale will be applied to the purchase of the September contracts.

TGT is off 0.11 percent to $62.62 in afternoon trading. The retail giant bounced off support at $60 with strong same-store sales data on Aug. 2, and it has been drifting higher since then.

The company is scheduled to release second-quarter earnings results on Wednesday. If those September calls are held until expiration, the stock would need to gain at least 4.3 percent in the next six weeks for the trade to be profitable. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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