[Options] A Hedge Against Spending

Sean McLaughlin
January 10, 2024

Today's trade is in a name that many American shoppers are familiar with.

You've probably seen TJ Maxx stores everywhere, frequently located in strip plazas throughout the suburbs. And there's a good chance your family has dropped some loot in there, taking advantage of the deals they are famous for.

JC commented today that he's invested in $TJX in his long-term account as a hedge for his wife's spending at this store. I think many of us can relate.

But what's got me most excited about this setup is the recent base just below $100, which would be an all-time high. Around here, we call that the hundred-dolla-roll, and it's one of my favorite setups:

 

Additionally, TJX Companies will report quarterly earnings at the end of February, which may act as either an anticipatory catalyst for bulls to front-run or a binary catalyst that shoots us north of the $100 hurdle following the announcement. Either way, I like our odds.

Here's the Play:

I like buying $TJX April 100-strike calls for approximately $1.60 per contract. This premium I pay today represents the most I can lose in this trade and I'll size my position accordingly.

However, I'll look to manage risk if $TJX can't hold the 91.50 level. Any $TJX closing price below 91.50 is my signal that I'm early or wrong and I'll salvage whatever is left of the call premium.

On the upside, I'll wait for $TJX to clear $100 before I consider taking action. Oftentimes, when a hundred-dolla-roll happens, the stock will overshoot by several points before any natural retracement happens. With this in mind, if/when $TJX prints north of $105 per share, I'll look to sell a portion of my position to take my original invested capital off the table. Then I'll enjoy a free ride with whatever is left into April.

If you have any questions on this trade, please send them here.

If you missed last week’s video Jam Session, you can catch a replay on Stock Market TV.

~ @OptionsSean

P.S. We do trades like this regularly. If you'd like to leverage Best-in-Class technical analysis into smarter directional options trades, try out All Star Options Risk Free! Or give us a call to learn more: 323-421-7910.

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