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Top Trade Alert – July 28th, 2022 – WBA and BIG

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From this morning’s Report:  

I was reminded this morning, WBA is still under $40, which is $34Bn and the company makes about $4Bn a year so not even 9 times earnings to buy Walgreens-Boots.

We just reviewed their Earnings Presentation this morning in our Live Chat Room and I can’t believe the negativity on this place where 67M people were vaccinated since last year.  ALL those people came to the store.  If they each spent $10 while they were there, that’s $670M of retail business and earnings were indeed up 13.9% from last year.

I guess people think Covid is “over” but it’s not by a long shot and we will be needing boosters for years to come.  Other than our Money Talk Portfolio, we had cashed in our WBA positions so now is a good time to add them back.

For our Long-Term Portfolio, let’s:

      • Sell 10 WBA 2024 $40 puts for $6 ($6,000) 
      • Buy 25 WBA 2024 $35 calls for $6.80 ($17,000)
      • Sell 25 WBA 2024 $45 calls for $2.35 ($5,875) 

That’s net $5,125 on the $25,000 spread that’s half in the money to start.  To the downside, we risk being assigned 1,000 shares at $40 and, if we lose the $5,125 entirely, our net cost of 1,000 shares would be $45.125 per share.  On the other hand, we are starting out half in the money on a $25,000 spread with $19,875 (387%) upside potential in 18 months.

In reality, we’re going to be thrilled to buy more if WBA goes lower and the puts can be rolled to 2025 $35 puts when they come out.  Having 25 spreads also paves the way for us to sell short calls while we wait.  The October $40s, for example, are $1.60 for 85 days (and we have 540 days to sell) so just selling 10 of those for $1,600 gives us 32% of our cash outlay back – but we’re too optimistic to do that just yet. 

That brings us back to our final laggard, Big Lots (BIG) and boy do people not understand their model.  Like any Retailer, BIG is dealing with cost pressures in gross margins due to freight and inventory shrink (theft) while operating costs are heightened due to supply chain inflation and labor inflation (increasing wages to store employees).

BUT, when you hear about stores like TGT and WMT taking hits as they seek to rebalance their inventory – think about Big Lots scooping that inventory up at low prices and then selling it to discount shoppers. 

BIG generates $4.4M per location vs $2-3M at Dollar Tree or Dollar General yet BIG has a Market Cap of just $565M at $19.50 with $5.7Bn in sales and they made $178M last year (this year probably even).  DLTR is valued at $36Bn with $1.8Bn (20x) in profits on $28Bn in sales and DG is valued at $55.5Bn with $2.5Bn in profits (20x) on $37Bn in sales. 

Big has 1,400 stores vs 8,000 for DLTR and 18,000 for DG so it’s got plenty of room to grow and that’s how we look at it – as a long-term investment.  The company has authorized $160M to buy back it’s own stock – 1/3 of it if they spend it at this price!  

We already have BIG in our Long-Term Portfolio and, at this point, we’re going to buy back the 20 short 2024 $55 calls for 0.35 ($700) and roll our 40 2024 $30 calls at $2.40 ($9,600) to 60 of the 2024 $15 ($6.50)/30 ($2.40) bull call spreads at net $4.10 ($24,600) and, after earnings, we’ll see about selling some short calls (we already sold short puts).  

Our original net was $5,620 and now we’re spending net $15,700 to end up with 60 of the 2024 $15/30 spreads ($90,000 potential) that are $24,000 in the money with 10 2024 $30 puts.  In April , we had rolled for $8,000 and doubled down for $14,500 for a total net of $43,820 so, at $30, our potential gain is now $46,180 (105%) despite BIG being down 50% from our initial entry in October of last year.  

As a new trade on BIG for our Earnings Portfolio, let’s:  

      • Sell 10 BIG 2024 $20 puts for $6 ($6,000) 
      • Buy 20 BIG 2024 $20 calls for $4.80 ($9,600) 
      • Sell 20 BIG $2024 $30 calls for $2.40 ($4,800) 

That’s a net credit of $1,200 so our worst-case is owning 1,000 shares of BIG for net $18.80 ($18,800).  The upside potential at $30 is $20,000 and anything over $19 is a profit.  Don’t you just love options?!?  

 

Top Trade Alert – July 27, 2022 – KHC

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KHC is down 8% despite a beat AND raised guidance – people are strange…

Kraft Heinz carries past second quarter estimates, raises full-year forecasts

KHC -8.02%
Jul. 27, 2022 9:12 AM ET
4 Comments
Consumer staples standby Kraft Heinz (NASDAQ:KHC) notched a beat on top and bottom lines for the second quarter, encouraging the company to raise its guidance for 2022.

For the second quarter, the parent company of Oscar Mayer, Grey Poupon, and more reported non-GAAP EPS of $0.70 and $6.55B in revenue, beating analyst estimates by two cents and $190M, respectively. The company credited a 12.4% increase in prices for buoying results amid a 0.9% decline in net sales.

We delivered yet another quarter of strong results as we continue to successfully navigate near-term headwinds, enabled by further advancements of our long-term strategy,” CEO Miguel Patricio said. “Though the environment remains fluid, we are better able to anticipate dynamic conditions, adapt to this constantly changing environment, and demonstrate our resiliency against new challenges.”

He cited new price increases and efficiency improvements as specific methods by which the company intends to “demonstrate resilience.”
Moving forward, the company raised expectations for organic net sales to a high-single-digit percentage increase versus the prior year period, as compared to a mid-single-digit percentage increase that was expected prior. Management maintained adjusted EBITDA guidance in the range of $5.8B to $6B.
Elsewhere, year-to date free cash flow fell to $353M, down 78% versus the prior year period due to “higher cash tax payments on divestitures in 2022 related to the Cheese Transaction, higher cash outflows for inventories primarily related to stock rebuilding and increased input costs” among other minor impacts.
Shares declined 1.16% shortly before Wednesday’s market open.

Read more on the details of the quarter.

We have KHC in the LTP and we’ll buy back the Jan $40 calls for $1 and pre-roll (without selling our long Jan $32.50 calls yet) to 50 2024 $35 ($4.50)/45 ($1.50) bull call spread at net $3 ($15,000) and we’ll sell 10 of the 2024 $35 puts for $4.50 ($4,500) so, as a new trade, that’s net $10,500 on the $50,000 spread.

We will also do that trade with 25 of the $35/45 spreads and 10 short puts for net $3,000 on the $25,000 spread in the Earnings Portfolio.

 

PSW Top Trade Alert – July 25th, 2022 – CROX

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CROX – Still stupidly cheap at $61, which is $3.9Bn for a company making $650M a year and growing at a 20% clip. CROX does have $2.7Bn in debt but that’s normal for a manufacturer/retailer and 3% of that is 90M – not really breaking the ample earnings bank (and prices will adjust to accommodate). Most of that debt is because they just bought Hey Dude for $2.5Bn and they have $500M in sales, which CROX expects to double in a couple of years (better distribution).

That means the growth can really kick in once they integrate but figure that’s 2024 and there are likely to be issues in-between so I wouldn’t be too ambitions but:

    • Sell 10 CROX 2024 $40 puts for $6.50 ($6,500)
    • Buy 15 CROX 2024 $55 calls for $21 ($31,500)
    • Sell 15 CROX 2024 $75 calls for $13.50 ($20,250)
       

That’s net $4,750 on the $30,000 spread that’s $7,500 in the money to start. There’s $25,250 (531%) of upside potential and, if you don’t REALLY want to own 1,000 shares of CROX for $44.75 – why would you enter the trade at $60.63?

 

Top Trade Alert – July 21st, 2022 – AT&

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T – Absolutely a good time to buy. Free Cash Flow is $14Bn instead of $16Bn and the stock drops to $140Bn?

The $2B decline is due to longer collection times for customers, higher costs of adding subscribers and continued pressure in its business services unit. AT&T (T) said that $10B of its free cash flow will come in the second half of this year.

There’s no update to the company’s 2023 cash flow forecast for $20B, Desroches said. Pressed on confidence in that number, Stankey said they feel “really good” about the mechanical things improving cash flow yields, but that the speed and magnitude of the inflation jump brings uncertainty, and “without seeing how the Fed reacts, how fast we see the curve starting to abate on the inflation side, trying to make that pick right now just feels like it’s a bit of an overreaction.”

The company has navigated that difficult reality effectively so far, he says, but “not sufficient to cover all inflationary impacts … We estimate those to be more than $1B above the elevated cost expectations embedded into our outlooks.”

So, in the 2nd half, they move to a $20Bn run rate but bad news now is SELLSELLSELL?

For the second-quarter, AT&T (T) earned 65 cents a share on $29.6B in revenue, compared to expectations of 62 cents a share and $29.47B in sales. The company added 800,000 postpaid phone subscribers, making it the best second-quarter in more than 10 years. It also added more than 300,000 Fiber subscribers during the period.

Traders are idiots.

The company said net debt fell by $37B compared to the first-quarter.

AT&T (T) increased its full-year revenue guidance for mobility services to be between 4.5% and 5%, and added that it also expects to generate more than $4B in cost savings by the end of the year.

We already loaded up at $18 but it’s a good time for a Top Trade now that you can buy it again at $18.50. The dividend is $1.11 and there’s no threat there so, let’s say you have $500,000 of retirement savings and you would like to collect $20,000 a year in T dividends:

    • Buy 5,000 shares of T for $18.50 ($92,500)
    • Sell 50 T 2024 $17 calls for $3 ($15,000)
    • Sell 50 T 2024 $20 puts for $3.40 ($17,000)

The initial outlay is $60,500 or $12.10 per share, about 1/3 off the current price. If assigned 5,000 more at $20 ($100,000) then it’s $160,500 for 10,000 shares or about $16.05 per share – that is the “Worst Case” and, meanwhile, you collect $5,550 in dividends while you wait.

So if T is below $20 in Jan, 2024, we get 5,000 more shares and we’re in for $16.05 and we repeat the cycle and knock $5 more off the net ($11) and then buy 10,000 more for maybe $15 ($150,000) and the average on 20,000 shares is $13 ($260,000) and we can stop there and collect $22,200 a year in dividends or we can get fancy selling more puts and calls to boost it.

If T is over $20, we get $85,000 back for a profit of $24,500 (plus dividends) and we start the cycle again. As long as you’re not retiring in 6 years – we’ll get there!

On the whole, we either get 5,000 shares closer to our ownership goal (at a 33% discount) in each flat or down cycle or we make $25,000 in an up cycle. If we “accidentally” make $25,000 over 3 cycles (6 years) we’ll still only have 5,000 shares but those shares will be completely free so, whatever the price of T is, we can then buy $10,000 shares at net 50% off AND get another 33% discount for the next 10,000.

It’s a nice, simple strategy for building a retirement portfolio.

Top Trades for Fri, 24 Jun 2022 12:10 – JPM and MMMB

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MMMB is stupidly cheap again at $1.22.  Small little company but a great value down here.

I guess it's time to buy JPM again as we're at the magic 10x line as $117.69 is $335Bn and they make $35Bn a year so – silly…  

In the LTP, let's:

  • Sell 10 JPM 2024 $120 puts for $18 ($18,000) 
  • Buy 25 JPM 2024 $110 calls for $19.75 ($49,375)
  • Sell 25 JPM 2024 $135 calls for $9 ($22,500) 

That's net $8,875 on the $62,500 spread so the upside potential is $53,625 (604%) over $135 and we're being aggressive on the short put sale as I'm very comfortable with the target and it's rollable, etc.  After 152 years in business I think they'll be fine and they just passed their stress test – although they were in the bottom of the bunch but that's because they are poised a bit bullish and taking on risk – which I agree with

Top Trades for Tue, 21 Jun 2022 13:58 – TROX, BBY

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TROX/Rn – Everything old is new again.  I only have to look back on our old LTPs to find stocks we love when they are cheap.  We used to have RH, CROX, etc. in our portfolios so it's easy to buy them again. I thought TROX was being sold or something?  $16.60 down from $26 is $2.5Bn and it's silly because they made $1Bn in 2020 (their first year of profit) and $286M last year and expect $512M this year and $578M next year so there's the whole company paid for in 4 years!  They just RAISED guidance and it's not like people have a lot of alternatives for titanium dioxide, is there (and most of them are in Russia)?  

Net $2.3Bn in debt means $60M (10%) chopped off earnings going forward but they'll pass that through to end costs.  TDiox is one of those things that's essential to many things but not a major ingredient so a bump in cost is not likely to get a lot of pushback.  

I think, for the LTP, let's just sell 20 of the TROX 2024 $18 puts for $4.50 ($9,000).  That nets us in for $13.50, which is a 20% discount and it will remind us to keep an eye on them.

The $15 puts are $3 so net $12 but I'm confident this is a good price for them and I'd rather make $4.50 than $3 on a move up.  What's really crazy is you can sell the $10 puts for $1 and that's net $9 – almost half the current price.  The Jan $20s are $4.50 so if we can roll them down $2, then we can roll to the 2025 $16s and the 2024 $14s, etc.  Since we REALLY don't mind owning TROX for the long haul – there's no reason to be cheap about our initial put position. 

How do we keep forgetting about BBY?  $70.50 is $16Bn in market cap and they made $1.5Bn in 2020 and $1.8Bn in 2021 and expect $1.9Bn this year, etc…  How can you not love that?   They only have $545M in net debt too.  

For the LTP, let's put our foot down here:

  • Sell 10 BBY 2024 $70 puts for $14.50 ($14,500) 
  • Buy 20 BBY 2024 $60 calls for $18.50 ($37,000)
  • Sell 20 BBY 2024 $90 calls for $7.10 ($14,200) 

That's net $8,300 on the $60,000 spread so we have $51,700 (622%) upside potential and we're $20,000 in the money to start.  Aren't options fun?  Downside risk is owning 1,000 shares at net $78.30 – 10% higher than it is now but I don't think that's too aggressive and we could sell another $25.60 set of puts and calls and we'd be back to net $51.70 – that would actually be a good thing to have!   When you love the worst case – it's a good trade!  

Top Trades for Tue, 21 Jun 2022 10:09 – LEVI and F

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Levi Strauss and Co. was founded in 1853 and they also sell Dockers.  They have 3,100 Levi stores (not Gap) and they did $5.7Bn in 2019 (made $395M), $4.4Bn in 2020 (lost $127M), $5.7Bn last year (made $554M) and expect $6.4Bn this year making $628M yet you can buy the whole company for $6.5Bn at $17.   Cotton costs have been killing them this year but they are likely to normalize going forward:

They pay a pretty nice 0.40 dividend but so does F for a lot less money so we should stick with options for the LTP:

  • Sell 20 LEVI 2024 $18 puts for $4.30 ($8,600)
  • Buy 50 LEVI 2024 $18 calls for $3.50 ($17,500)
  • Sell 50 LEVI 2024 $23 calls for $1.65 ($8,250) 

That's net $650 on the $25,000 spread.  That's an upside potential of $24,350 (3,746%) and it would cost us $20,000 more to be in the $10s, so it's not worth it as I think $23 is an easy target.  

In the Morning Report, we discussed trade ideas for Ford (F):

That's what we're punishing companies for now.  Inflation is causing companies to adjust and labor rates are rising but most companies are covering them with price increases that, so far, have not slowed down consumer spending.  More raises put more money into consumers hands but, looking at F, another $2.50 per day doesn't let you buy a Model T next week – it takes a while for these things to evolve – but "investors" today have no patience at all.  

At $11.23, F has a market cap of $45Bn – even though they made $18Bn last year (not a typo).  This year and next year they expect to make a more normal $8Bn but that's still a p/e of 5.5 going forward.  F does have $94Bn in debts (net of $41Bn in cash) but that is the nature of their business and we assume it will take 3% more to service the debt going forward, so that will hit F for $3Bn a year and drop eanings down to $5Bn BUT, a lot of F's outstanding debt is for financing – so they may not be hit so hard by increased rates.

Still, if we say they make $5Bn a year until inflation gets them back to their usual 5% Net Profits and we give them 10x in a non-panicked market – that's going to be a $50Bn valuation at about $12.50.  That's where we'd draw the line.  So, as a new play on F, I would like:

  • Sell 20 F 2024 $12 puts for $3 ($6,000) 
  • Buy 50 F 2024 $10 calls for $3.25 ($16,250)
  • Sell 50 F 2024 $15 calls for $1.40 ($7,000)

That would be net $3,250 on the $25,000 spread so the upside potential, at $15 or above, would be $21,750 (669%) and we're starting out $6,000 in the money already.  Worst-case scenario is owning 2,000 shares of F at $12 and, if we lose the $3,250, our net cost would be $13.62/shar but then we could sell 2026 puts and calls and knock $4.65 off that price, right?  

Meanwhile, F pays a nice 0.40 dividend so we could do the above as a stock play as such:

  • Buy 2,000 shares of F at $11.23 ($22,460)
  • Sell 20 F 2024 $12 calls for $2.45 ($4,900)
  • Sell 20 F 2024 $12 puts for $3 ($6,000) 

In this case, we're in 2,000 shares at net $11,560 or just $5.78 per share and that makes the 0.40 annual dividend 6.9% while we wait to get called away at $12 ($24,000) for an additional $12,440 (107%) in profits – and that's at $12 – LOWER than the stock is trading now.   The worst-case scenario to the downside is you are forced to buy 2,000 more shares for $12 ($24,000) and then you are in 4,000 shares for $35,560 or $8.89/share – which is 20.8% below the current price.  Not even including the dividends.  

When your worst-case scenario is something that sounds pretty good – then it's a good trade to make, right?  

These are the kind of opportunites we get in a bear market because we are able to remain calm and do simple math while others are in a panic (a TA person would never buy F's chart).  There are many stocks we'll be able to take advantage of – our Members already have F in their portfolios but this is a rare opportunity to get in at rock-bottom prices if you don't have it already. 

 

 

 

 

 

Top Trades for Fri, 10 Jun 2022 12:47 – IBM and CIM

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China/Tommy – Vaccines work, people will get mild cases and move on with their lives.  It's simply not practical to hide out from Covid as it's not like it's going to go away and stop bothering people.  

MDT/Tully – They only pay 3% and they are too volatile.  IBM is our Stock of the Year and still stubbornly at $135 (because it's so great) and pays a lovely $6.60 per $135.78 share (4.7%).  You can buy the stock and sell the 2024 $125 calls for $25 and that nets you in for $110.78, called away at $125 with a 14% gain in 18 months plus the dividend – better than keeping it in the bank and, if they drop 20% to $108, you can sell the 2024 $100 puts (now $8.65) for what the $125 puts are $14 or better and then your net is $96.78.  

And, of course, there's CIM at $9.57, who pay a $1.32 dividend (13.4%) and you can buy those shares and sell 2024 $10 calls for 0.80 and the 2024 $8 puts for $1.50 and then you are in for net $7.27, called away at $10 with a $2.73 (37.5%) gain and collecting 0.33 (4.5%) PER QUARTER while you wait.  How can you not love that?

Top Trades for Wed, 08 Jun 2022 09:56 – LOVE

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LOVE -22.08%Jun. 08, 2022 7:47 AM ET

The Lovesac Company (NASDAQ:LOVE) gained in early trading on Wednesday after reporting a 42.2% rise in comparable sales during Q1 with strong growth seen across showrooms and on the Internet.

Total sales rose 56% during the quarter to outpace the 44.8% increase in operating expenses. Gross margin fell to 51.1% of sales from 55.6% a year ago as distribution costs and tariff expenses dragged. Adjusted EBITDA was up 19.5% to $6.4M.

The increae in comparable showroom sales during the quarter was tied to higher point of sale transactions with lower promotional discounting, a strong Easter promotional campaign and the addition of 31 new showrooms, 13 kiosks, and 2 mobile concierges compared a year ago.

Net income was $1.9M in Q1 vs. $2.1M a year ago.

Lovesac (LOVE) ended the quarter with an inventory position of $123M vs. $56.0M a year ago. The co,pany said the higher inventory position was to support growth and maintain industry leading in-stock positions, coupled with an increase in freight capitalization related to an increase in inbound freight expense.

CEO outlook: "Looking ahead, we continue to focus on product innovation, most obviously represented by our still-new StealthTech invisible home audio solution, efficient and targeted marketing and campaigns, channel expansion with new and existing partners, and a focus on operational excellence."

Shares of Lovesac (LOVE) were up 1.55% premarket to $38.59 following the earnings topper.

I like these guys but they are getting sold heavily on this news.  They sell modular furniture and $28 is just $430M in Market Cap and they expect to make $50M this year and $70M next, which is on-par with their growth track.  Let's take advantage of this silly reaction and add them to our Future Is Now Portfolio:

  • Sell 5 LOVE Jan (as far as they go) $25 puts for $5 ($2,500)
  • Buy  10 LOVE Jan $22.50 calls for $10.50 ($10,500) 
  • Sell 10 LOVE Jan $30 calls for $7 ($7,000) 

That's net $1,000 on the $7,500 spread so $6,000 of upside potential if they can just hold $30.

In the Earnings Portfolio, let's:

  • Sell 10 LOVE Jan $25 puts for $5 ($5,000) 
  • Buy 25 LOVE Jan $22.50 calls for $10.50 ($26,250) 
  • Sell 25 LOVE Jan $35 calls for $5.50 ($13,750) 

Here we're taking a bigger position as this portfolio has more cash and is way ahead.  It's net $7,500 on the $31,250 spread so we have $23,750 (316%) in upside potential – but that's for just 6 months, so very nice.  

Top Trades for Tue, 07 Jun 2022 10:17 – TGT

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From our Morning Report:

Buying habits are changing.  

This is not news to people who've been listening to our Live Trading Webinars for the past few months or followed along in our PSW Reports or our Live Member Chat Room (all of which you can be join right HERE).   In fact, just last Thursday we decided TGT was cheap enough and opened the following trade at 1:40 pm for our Long-Term Portfolio:

  • We talked about how silly TGT is at $160 and we sold 5 2024 $200 puts in the LTP for $19.85 ($9,925) and there's nothing wrong with that TARGET (so clever!) so let's add 15 TGT 2024  $150 ($32.50)/200 ($13.50) bull call spreads at $19 ($28,500) and that will put us in overall at net $18,575 on the $75,000 spread.   If TGT goes lower, we sell 50 more calls and add 10 more longs.  

We already had a loss on the puts but we sold 5 2024 $200 puts for $19.95 so our net target on 500 shares is $180.05 and our position looks like this:

TGT Short Put 2024 19-JAN 200.00 PUT [TGT @ $159.67 $-1.37] -5 4/7/2022 (591) $-9,925 $19.85 $30.53 $-19.85     $50.38 $-15,263 -153.8% $-25,188
TGT Long Call 2024 19-JAN 150.00 CALL [TGT @ $159.67 $-1.37] 15 6/2/2022 (591) $48,750 $32.50 $-0.48     $32.03 $-1.26 $-713 -1.5% $48,038
TGT Short Call 2024 19-JAN 200.00 CALL [TGT @ $159.67 $-1.37] -15 6/2/2022 (591) $-20,250 $13.50 $-0.65     $12.85 $-0.93 $975 4.8% $-19,275

TGT should be down around $145 this morning on the news but taking a writedown on inventory is not really news and TGT expects to return to normal margins (6%) in the second half of the year so, if you are a long-term investor, NOW is the time to be buying, not selling.  When a stock plunges 10%, there are things we can take advantage of and thing one will be selling 10 of the 2024 $150 puts for $25.  That will be a pre-roll of the short $200 puts but, since we don't think $180 is an unreasonable target – we're not going to buy those back until TGT bounces – perhaps next quarter.

Inflation MeterThe other thing we can take advantage of is the way the $140 or $130 calls that are in the money will lose significantly more price than the out of the money 2024 $150 calls we have – which will gain premium as the volatility of the stock goes up.   We will take advantage of that by rolling our $150 calls (now $32.03) to the $140 calls ($37.50 at yesterday's close) or the $130 calls ($44 at yesterday's close) as long as we can pay less than $5 for $10 worth of position.

Assuming we spend $5 to roll to the $140 calls, that would be $7,500 spent for the roll and $25,000 collected on the puts and we paid $18,575 for the overall position so now our net cash in drops to $1,075 for the $140/200 spread that is $7,500 in the money at the assumed $145.  We are obligated to own 500 shares at $200 ($100,000) and 1,000 shares at $150 ($150,000) so our commitment is owning 1,500 shares of TGT at $166.66.  

As long as TGT stays over $120, then our downside risk is about $45 x 1,500 shares = $67,500 but we would mitigate that by rolling our short puts and selling short calls to cover.  For example, if we are assigned the stock at $166.66 and we sell the 2024 $140 calls for $35, then our net would be $131.66 

Customer demographicsThis is a process called "scaling in" to a position – we begin with a small commitment and then, if the stock gets even cheaper for what we consider to be poor reasons – we adjust and add to it. In the case of TGT, sales are not off – they simply have the wrong mix of inventory as consumers are scaling back their spending habits and they need to adjust but $145 is $67Bn in market cap for TGT, who made $6.9Bn last year and, even with the adjustments, should make $4Bn this year and $6Bn again next year so $67Bn is stupidly cheap – and we'll take advantage of it!  

This is why we like to have plenty of cash (75% in our LTP) on the sideline in a choppy market – you never know when things are going to go on sale…

After the open, we officially are going with:

TGT/Millard – From scratch, I'd go with:

  • Sell 5 2024 $150 puts at $23 ($11,500)
  • Buy 15 2024 $130 calls at $38.50 ($57,500)
  • Sell 15 2024 $170 calls at $18.25 ($27,375)

That's net $18,625 on the $60,000 spread with $41,375 (222%) upside potential in 18 months if TGT can get back to $170, 

Officially, for the LTP, we're selling 10 more 2024 $150 puts for $23 (opened at $24) and we are rolling the 15 2024 $150 calls (now $28.50) to 15 2024 $140 calls at $33.50 for net $5 ($7,500).  Unfortunately, TGT bounced back very fast – probably because I mentioned it in the main post, so my bad.