×

Traders bet that this retailer is about to fall

Is Target set to miss the mark?

The retailer may not report earnings until Nov. 19. But on Monday, options traders were already making gobs of bearish bets on the stock, with many betting that Target shares will be 5 percent lower in four weeks' time.

Specifically, on a day when puts on Target traded some five times their average daily volume, the most popular trade was buying the November 59.50-strike puts for $0.90. Since a put gives its owner the right, but not the obligation, to sell a given stock at a given time, these puts will only make money if Target shares close below $58.60 on Friday, Nov. 21.

"It's common to see heavy options volume right before an earnings announcement," but given that earnings are still so far away, "maybe it's not just earnings that they're making a play on," Mike Khouw of Dash Financial commented Monday on CNBC's "Fast Money."

Adam Jeffery | CNBC

He points out that Target investors might be nervous about congestion and delays at the Port of Los Angeles, where many of Target's goods arrive.

Read More A US port squeeze could ruin holiday shopping

Alternately, investors may be concerned about Target's move to provide free shipping online as well as same-day, in-store pickup for many items, in what appears to be an attempt to compete with Amazon.

Read More Target offers free shipping on all holiday items

"So it could be the issues that are going on at those ports, it could be the competition with Amazon, or it could be earnings" that are leading these traders to bet against Target in the short-term, Khouw surmised.

Follow the show on Twitter: @CNBCOptions.

Latest Video

Tutorials

Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

Options Action Traders

From Our Sponsor

Options Action Newsletter:

Sign up to receive exclusive Options Action content. Each month you'll receive an exclusive message from host Melissa Lee and insight directly from one of the members of our Options Action panel. Keep your pulse on the market with the Options Action newsletter.

Please enter a valid email address
To learn more about how we use your information, please read our Privacy Policy.