Target Stock Hammered With Heavy Options Expiry on Dec. 17

Target Corporation TGT stock is getting hammered in Wednesday trading, down nearly 5% an hour before the close on strong volume. The stock has traded over 5 million shares on the day versus the 10-day average of 3.7 million shares, but the bigger issue is the amount of options rolling off on the Dec. 17 expiry, with over 30% of the options coming off the board to end the week.

Heading into today's session, Target had about 180,000 calls and approximately 160,000 puts for a total of 340,000-plus options and approximately 105,000 options expiring Friday. 

Why It Matters: Anytime you have a significant amount of options expiring, that clears those options from the board. Considering there were more calls than puts and a significant amount of OTM (out of the money) calls between the $240 and $280 strikes, that's a lot of bullish flows phasing out for this monthly op-ex.

What's Next: The largest expiry by volume on the day is the Jan. 21 expiry for next year with approximately 15,000 calls added (image below).

The approximately 15,000 calls added to the market for the Jan. 21 expiry next month represent over 30% of the total volume on the day for strong forward-looking option flows. The largest strike by volume is the $240 strike, but there is also strong open interest between the $250 and $280 strikes. It is also important to note there is decent volume coming in at the $220 strike, with strong open interest between $220 and $210.

Thus, even though the stock is down almost 5% on the day, there are solid volumes around the current levels, with bullish interest for a move back up to $240 by the op-ex in January next year. If the stock can hold and rally at these levels, it gives the stock plenty of time to build up more bullish call options at or above the current price and provide support for the coming month.

But traders should expect volatility to end the week and start the next with such a heavy options expiry coming Dec. 17.