Earnings season is always a minefield, but it’s also full of opportunities if you know where to look. One of the setups I’m eyeing right now is Target (TGT), which reports before the open Tuesday.
It has the potential to deliver a massive return with the right options strategy — and I’m not talking about some far-fetched, high-risk lotto ticket.
A Simple Pattern With Big Potential
Target has a clear earnings pattern over the past four quarters: gap up, gap down, gap up, gap down. If that holds, the next move should be higher. Of course, that’s far from the sole reason to trade it, but it’s a starting point.
What really makes this trade interesting is the psychology behind it. Target recently broke down, shaking out a lot of weak hands. Buyers who got in higher were forced to sell as the stock hit new lows.
That means most of the selling pressure has likely already played out. If the stock gaps up on earnings, there’s very little resistance above — and that’s where things get fun.
The Risk-Reward Setup
This is where options come in. Instead of buying the stock, I’m looking at the $135 strike calls for next week, which are trading around $2.40.
Editor’s note: Lance bought the TGT $130 calls expiring next week for $2.82 a contract after the show this morning. Always keep in mind that prices will have moved by the time you read this, so adjust accordingly. Now back to Lance’s example.
If Target moves up to $145, those calls could be worth around $10. That’s more than a 4X return on a simple earnings setup.
Now, let’s be clear: This isn’t a guaranteed win — and there’s no such thing as a guarantee in trading.
If Target misses and gaps down, those calls could go to $0. But in trading, it’s not about being right all the time — it’s about maximizing upside when you are. A 50/50 shot at a 4X return is a bet I’ll take every time.
That’s the mindset you need to have in this market. Too many traders focus on win rates instead of the size of their winners. If you’re aiming for 95% accuracy, you’re probably taking tiny profits. But if you’re willing to take a few losses for a shot at 100% or more gains, that’s how you can really grow an account.
Earnings trades like this aren’t for everyone, but they’re worth considering if you understand and respect the risk. Target is setting up for a potentially big move — and if the pattern holds, it could be one of the best trades of the week.
Order Flow:
Friday’s plays are still good, and we added a couple of plays in other stocks reporting this week. As always, respect that risk!
*This is for informational and educational purposes only. These are not official alerts issued by Lance, but rather some interesting orders picked by the team at Lance Ippolito Trading.
There is inherent risk in trading. Trade at your own risk.
Note: If no date is listed after the month, it’s the monthly expiration (third Friday).
The team at Lance Ippolito Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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