Rocket Equities & Options Report

By Tommy O’Brien

November 16, 2022

TGT is down 11.71% right now, yet has rebounded from the opening price of $149.85 to now trade at about $158 – still down almost $21 on the session.

WMT beat for their numbers earlier in the week, helped by their grocery numbers. TGT saw discretionary spending changes that hurt their numbers and will weigh on their top and bottom line into next year.

Retail sales this morning were up 1.3% (the biggest number in 8 months) vs. 1.0% expected. Excluding gasoline and autos, retail sales were up 0.9%. Sales at clothing stores were little changed while those at department stores fell 2.1%. The figures aren’t adjusted for inflation.  

Kohl’s comes out with their earnings tomorrow – the stock is down $2.60 or 8.11% right now trading at $29.47. Options are pricing in around a $2.72 move in either direction for this Friday’s options. We are going to sell a credit put spread and collect some of that options premium that is priced into the stock on the downside.

This is a flat to bullish trade in KSS coming into their numbers. We are risking about $185 per contract pair to make $65, so essentially 2.85 to 1.

KSS has priced in Target’s miss today with downside action, and KSS does business in the areas that Target saw pull back in discretionary spending, so the risk is there like any trade, but with a lot of volatility still priced into the downside.

We are selling a $28.50-$26.00 credit put spread in KSS in the Nov 18th Options expiring Friday.

There’s a very real chance they miss their numbers and the stock blows through our entire defined risk so don’t think just because this is a high probability trade that it can’t miss.

Sell $28.50 KSS Nov 18th Put (trading about $0.86)

Buy $26.00 KSS Nov 18th Put (trading about $0.21)

This pair results in a net credit of about $0.65 which is our max profit, and our max loss is $1.85 if KSS trades to $26 or below at Friday’s expiration. Our breakeven is at about $27.85. We are risking $185 to make $65.

Stay tuned for updates!

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