Pre-Earnings Traders Target Key Macy's Chart Level

Traders have both bought and sold to open the March 24 put

Feb 25, 2019 at 12:09 PM
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Macy's Inc (NYSE:M) is scheduled to report earnings before the open tomorrow, Feb. 26, as the shares continue to test the $24 level, last seen at $24.47. The stock has been bouncing atop this price point since its early January bear gap, sparked by the company's ugly holiday season performance, Friday bottoming out at $23.95 before closing just above this level. Meanwhile, the $24 mark has turned into a battleground among M options traders.

macys stock chart

During the past 10 days, the March 24 put has seen the largest increase in open interest, with almost 15,000 contracts added, and data shows a mix of buying and sell at the option. Those buying the put expect Macy's stock to fall below $24 by expiration on Friday, March 15, and the put sellers are hoping the level holds as support through then.

More broadly, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows unusual call buying on the retail concern. That is, the 10-day call/put volume ratio across these exchanges is 3.61, ranking in the 84th annual percentile.

The shares' recent post-earnings performances have been quite ugly, falling 7.2% the day after earnings last quarter, and 15.9% back in August. The options market this time around is pricing in a 14.7% swing for the stock in tomorrow's trading, but according to the equity's Schaeffer's Volatility Scorecard (SVS) of 24, traders have had a tendency to overprice volatility expectations on M during the past year.

The vast majority of analysts covering Macy's have "hold" or worse recommendations at the moment, not overly surprising given its technical performance. By the numbers, the shares have shed 32.5% in the past six months alone.
 

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