Pre-Earnings Option Bulls Keep the Faith On Macy's Inc (M)

Macy's Inc (NYSE:M) will take its turn in the earnings confessional ahead of Thursday's open

Aug 9, 2016 at 1:32 PM
facebook X logo linkedin


Most retail stocks are trading lower today, following a negative earnings reaction for Coach Inc (NYSE:COH). Shares of Macy's Inc (NYSE:M), for instance, have dropped 2% to trade at $34.04. With Macy's set to join a number of its fellow department store chains in the earnings confessional later this week, though, options traders are keeping the faith. At last check, roughly 32,000 call options have traded on M stock -- four times what's typically seen at this point in the day, and in the 98th annual percentile.

Diving deeper, M's weekly 8/12 32-strike put and 37-strike call are being used in a three-way spread with the stock's August 34 call. Meanwhile, the weekly 9/9 34-strike call has garnered notable attention, and it seems safe to assume new positions are being purchased. In other words, traders are betting on M to reverse course and rally north of $34 through the close on Friday, Sept. 9 -- when the weekly options expire. If the calls expire out of the money, however, the most the option buyers stand to lose is the initial premium paid.

More broadly speaking, today's accelerated call volume is just more of the same in M's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (ISE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 4.43 ranks higher than 71% of all comparable readings taken in the past year. Simply stated, calls have been bought to open over puts at a faster-than-usual clip.

As such, the equity's Schaeffer's put/call open interest ratio (SOIR) is docked at 0.39. Not only does this show that calls easily outweigh puts among options expiring in three months or less, but it ranks in just the 8th percentile of its annual range. In other words, short-term speculators have rarely been as call-heavy as they are now.

Outside of the options arena, short sellers have been increasing their short positions of late. Specifically, short interest jumped 10.5% in the most recent reporting period. However, these shorted shares still represent a low 3.3% of the stock's available float, meaning M's bearish bandwagon is far from full.

Looking at the charts, it's not too surprising to see short sellers betting on additional losses for M. Year-over-year, the stock has shed almost half its value. Plus, the equity's recent rally attempt was quickly halted near $37 -- site of a mid-May pre-bear gap close, a slide induced by the company's dismal first-quarter earnings report. Should Macy's Inc (NYSE:M) turn in a fresh set of disappointing quarterly results ahead of Thursday's open, a capitulation from option bulls and/or another round of short selling could pressure the shares even lower.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.
 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI