Mike Khouw's Target Corporation (TGT) Trade

Mike Khouw said on CNBC's Options Action that consumers are going to spend less. With this in mind, he wants to make a bearish trade in Target Corporation TGT. His idea is to buy the September 50 put for $1.55, and finance it by selling two puts with different strikes. He wants to sell the September 48 put for $0.90, and the September 46 put for $0.65. This strategy is called a put tree. Net net, he is paying nothing to put this trade on. If the stock falls below $48 or $46 at the expiration, he will have to own TGT. Target Corporation (TGT) fell 1.93% today, and closed at $50.81.