The short leg of our Target (TGT) LEAP call spread is in the money. I am recommending we roll it out to the January monthly expiration and to a higher strike price to avoid being called out of the position. We will be spending some cash to do so but picking up an additional $10 in potential appreciation.
While we closed our Best Buy (BBY) position earlier today at a loss, I want to stick with TGT long term, which was the original intent of this position. I see TGT as undervalued compared with BBY.
I also believe Target has moved past some of the major issues, like too much inventory, that caused shares to crash mid-year and expect the retailer to emerge stronger in the new year.
Note: No action is needed on the TGT Jan 2024 Monthly (1/19/24) 150 Call at this time.
Current Stock Price: $165.01
Cost Basis: $39.24
- Buy to close the TGT Dec Monthly (12/16) 160 Call for around $8.10
- Sell to open the TGT Jan Monthly (1/20) 170 Call for around $6.35
- Set initial debit limit at $1.75, but adjust as needed to roll today
New Cost Basis: $40.99