TGT is earning about $4 a share and you can buy them for $50, that's what I care about. I'm a fundamental investor and I like to buy stocks that make me a return on my investment as a business. If they are doing that, the stock price will eventually follow.
For their sector, figure 15x earnings ($60) would be a reasonable price and, even if you assume AMZN really hurts them for 10% (unlikely) then $54 is still better than we are now so let's add them to the OOP:
- Sell 5 TGT 2019 $45 puts for $4.20 ($2,100)
- Buy 7 TGT 2019 $40 calls for $12.50 ($8,750)
- Sell 7 TGT 2019 $52.50 calls for $5 ($3,500)
That's net $3,150 on the $8,750 spread that pays $5,600 (177%) and all TGT has to do is hold $52.50 in to Jan 2019.
TOO/Albo – I'm staying away from those shippers but fun for speculation.
Spreads/Jabob – Try starting out buying less and stretching your timeframe to include 2 years of rolls and you'll be a lot happier.
