I’m reporting an options trade that executed on Tuesday. It’s not a secret that I think TGT is currently providing decent value in this market. I have been adding shares for months and dollar-cost-averaging. I’ve now amassed a position of 115 shares at a cost basis of $64.36. Shares of Target keep edging lower and are current around $59/share. In addition to keep adding shares, I decided to sell a put. This put allows me the opportunity to pick up shares of TGT much cheaper than my cost basis and even the current market price.
Target is currently yielding 2.9% and S&P Capital IQ has a 3-year estimated EPS CAGR of 8%.
I Sold 1 TGT July 19 ’14 $57.50 Put @ 2.59
This trade could turn out a few ways:
1) I hold shares until expiration and shares are trading above $57.50. I will get to keep the $259 in options premiums.
2) TGT is trading below $57.50 at or before expiration and shares are assigned. I will receive 100 shares of TGT at a cost of $54.91/share. This is a discount of over 6% to where the stock is currently trading and 14.7% below my cost basis of $64.36/share.
3) Shares of TGT go on a run and I decide to buy back the put early for a profit less than $259.
I currently have 9 open options positions and a total options profit of $716 for 2014. My options page has been updated accordingly.