Wal-Marts's Woes = Opportunity
By Dr. Paul Price of Market Shadows
Discount retailers sold off en masse today (Sept. 25) after Bloomberg reported that Wal-Mart (WMT) had cut back on wholesale ordering due to slow sales. Costco (COST), Family Dollar (FDO), Dollar Tree (DLTR) and Dollar General (DG) also reacted and fell in sympathy.
So did Target. TGT closed Wednesday at $63.34. It had changed hands at $73.50 in July. Late today, Market Shadows sold a TGT January 2015 $65 put for $7.60 per share.
Our maximum gain is 100% of the premium received, or $760. We’ll keep the full amount if Target closes above $65 on expiration date.
Break-even on this trade is the $65 strike price minus our $7.60 premium on the put sale. That comes to $57.40 per share. TGT has not traded that low in almost eighteen months.
We would be happy to own Target at $57.40, which we will if the put is put to us (we buy the stock at expiration). The current quarterly payment would provide a 3% yield at our 'if put' entry price.
See full details of all our close-out and open virtual put positions: put-selling-virtual-portfolio
Disclosure: I sold TGT Jan. 2015 $60 & $65 puts in my personal account today.
