Put buyers set crosshairs on Target Corp

TGT – Target Corp. – Shares in Target kicked off the final trading session of the week in positive territory, but have since shed earlier gains to stand 0.50% lower on the day at $61.53 as of 11:10 a.m. ET. The big box retailer popped up on our market scanners in the early going due to heavy trading traffic in front month put options. Interest in the Feb. $60 strike puts has been increasing throughout the morning, with volume currently topping 12,100 lots versus previously existing open interest of 2,827 contracts. Most of the put options appear to have been purchased for an average premium of $0.36 apiece. The contracts make money, or provide downside protection, should shares in Target decline another 3.1% to breach the average breakeven point at $59.64 by February expiration. Target Corp. is scheduled to report fourth-quarter earnings before the opening bell on February 27th, nearly two weeks after February options expiration.

DOW – Dow Chemical Co. – Upside call options in play on Dow Chemical this morning look for shares in the largest U.S. chemical maker by revenue to rally to their highest level in more than a year during the next couple of months. Shares in the name today trade up better than 0.50% to stand at $34.62 as of 11:45 a.m. ET. The stock has rallied more than 25% off a mid-November, 2012, 52-week low of $27.45. Traders positioning for shares in Dow Chemical to extend gains picked up more than 7,400 calls at the Mar. $36 strike for an average premium of $0.54 each. The bullish options make money if shares in DOW rally another 5.5% to top the average breakeven price of $36.54 by March expiration. Shares in Dow Chemical last traded above $36.54 in July of 2011. Overall options volume in excess of 20,000 contracts in play on the chemical company as of midday in New York is significantly greater than the stock’s average daily volume of around 13,000 contracts. Trading traffic in options on the Midland, Michigan-based Company is on the rise as investors await Dow Chemical’s fourth-quarter earnings release ahead of the opening bell next Thursday.

ADSK – Autodesk, Inc. – Call options on the maker of software for customers in the engineering, architectural, construction, and manufacturing industries are active this morning, with shares in Autodesk rising more than 6.0% to $40.00 on Friday morning, reaching their highest level since May 2012. The stock yesterday was raised to ‘Outperform’ from ‘Sector Perform’ with a 12-month target price of $50.00 at RBC Capital Markets. Bullish positioning in front month calls suggests some traders anticipate further upside in the price of the underlying in the near term. Meanwhile, traders who purchased calls on ADSK yesterday are enjoying a sharp pop in the value of their contracts overnight. Time and sales data on the Feb. $39 strike call from Thursday suggests some 285 of the $39 strike calls were purchased yesterday for an average premium of $0.36 apiece. Since then, premium on these contracts has more than doubled to $1.00 per contract. Options strategists initiating bullish positions on Autodesk today picked up Feb. $40 and $41 strike call options at average premiums of $1.24 and $0.87 apiece, respectively. Bullish trading spread to the Mar. $42 strike calls, as well. It appears roughly 250 of the $42 calls were purchased in the early going today for an average premium of $0.87 each. Autodesk reports fourth-quarter earnings at the end of February.