Tim Biggam's Target Trade

Tim Biggam of Delta Derivatives spoke on Bloomberg Markets about an options strategy in Target Corporation (NYSE: TGT).

The stock caught his attention because it held well its support level at $70. It struggled in 2015, but it is trading around 2 percent higher in 2016, while the market is down around 5 percent. Biggam also likes its 3 percent dividend yield and he believes that its price-to-earnings multiple of 14.5 makes it a cheap stock, because it is trading with a discount to the rest of the market and it has above average dividend yield. He added that lower gas prices should help Target.

Biggam wants to buy the stock and sell the April 80 call for $1.50. With a long position in the stock he gets the 3 percent dividend yield and the premium that he collects for the call option offers a 2 percent protection on the downside.