$TGT bears hit the mark

Bearish option traders have hit the mark on downside option positions in Target (TGT) today.

On Jan. 8, Market Rebellion’s Unusual Option Activity Service identified the purchase of 5,000 January $121 puts in one print for $1.66 with shares at $123.95. The volume was well above the open interest of 732 contracts at the time, indicating that this was a new position.

Those puts have so far traded for as much as $4.61 today, more than 2.5 times their purchase price. The stock fell 5.95% at the same time, showing how quickly options can far outperform their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

TGT has fallen this morning by 6.21% to $117.45, the retail chain reported same-store-sales for the November/December period this morning, up 1.4% as well as backing its Q4 earnings expectations.