Trader bets big on a Target miss

Target is set to report earnings on Wednesday morning, but one big trader thinks the retailer is set to miss the mark.

In a big trade on Monday, one firm bought 1,000 November 66.50/63.50 put spreads for $0.60 per share. This short-term trade only makes money if Target shares fall below $66.50 by Friday, with a maximum profit of $2.40 per share, or $240,000 in total, if Target falls to $63.50 or below.

On the whole, the options market isn't expecting a massive move from Target. Options prices tell us that traders expect a 3 percent, one-day move off of earnings. That is in line with the stock's recent responses to earnings.

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For Dan Nathan of RiskReversal.com, a trade like this makes sense.

The stock is up sharply in the last few weeks, and "they want the stock, in the next few days following the earnings report, to be down, retracing a good part of this move here. It's just a defined-risk event trade."

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"I would say, in a market like this, where it doesn't make a whole heck of a lot of sense to short any stocks, this is a way to make a bearish short-term bet," Nathan added.

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

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