Options Playbook Ep. 460 — Exploring #TGT
This episode of Options Guy TV lands squarely in the middle of retail earnings week, with Home Depot reporting the next morning and Target, TJX, and Lowe’s all set to announce before Wednesday’s open, followed by Walmart later in the week. Brian Overby frames the whole stretch as a genuine referendum on the health of the American consumer, noting that despite persistent headlines about economic uncertainty, spending had continued to hold up reasonably well, and that this particular week of retail earnings would offer some of the clearest read yet on whether that resilience was continuing or starting to crack.
Target is the episode’s main focus, and Brian walks through its chart carefully, tracing a strong, relatively low-volatility uptrend from around 90 up to the mid-150s, with a key resistance zone identified around 168 to 170 based on a prior high. His original plan was to sell a skip strike butterfly above that resistance level to lean bearish-to-neutral, but he’s transparent that the trade simply doesn’t price out well given Target’s relatively wide two-and-a-half-point strike increments and limited premium in the out-of-the-money options, a good real-world example of how a strategy that looks appealing on a chart doesn’t always translate into an executable trade once you actually check the option chain.
Rather than force the skip strike structure, Brian pivots to comparing two more straightforward alternatives live on air. The first is an inexpensive bullish open wing butterfly using the nearest Friday expiration, buying the 157 strike, selling two 162.50 strikes, and buying one 165 strike for just 84 to 93 cents, a trade he ultimately makes official specifically because of how little capital it requires relative to its potential payout. The second is a longer-dated short call spread targeting October, selling the 172.50 strike and buying the 177.50 strike for a modest 79-cent credit, which he executes as a secondary, non-official trade to illustrate the alternative approach even though he ultimately prefers the butterfly for its more favorable risk-reward profile heading into a report where the stock has already shown strong momentum.
The episode’s most instructive moment, though, comes when Brian pivots to Lowe’s, walking through his reasoning for why he actually prefers it to Home Depot heading into the same earnings cycle, citing Lowe’s somewhat lower valuation and comparable business dynamics. He works out a skip strike butterfly live, adjusting strikes and expirations several times in real time as the premium fails to hit his target credit, ultimately landing on a September 4th, 2.5-point-wide structure selling the 227.50 strike and buying up through 235, aiming for a 20-cent net credit. It’s a genuinely useful, unscripted look at how much iteration goes into finding a workable strike selection when the first several attempts at a target price simply don’t fill.
By the close of the episode, Brian has three live trades reflecting a consistently bullish-to-neutral read on the retail sector heading into a pivotal earnings week, a cheap directional butterfly on Target, a longer-dated hedge-style short spread on the same name, and a credit-oriented skip strike butterfly on Lowe’s. Taken together with his broader comments on consumer credit card data and Visa’s own recent strong numbers, the episode offers a coherent, multi-stock view on how the health of the American shopper was showing up across several different corners of the market at once.
