Macy's Inc's (M) October and November 36 calls are seeing buy-to-open activity
Macy's Inc (NYSE:M) is getting mowed down today, losing 3.5% to trade at $35.53. J.P. Morgan Securities is
turning up the heat on retail stocks, and for M, this has meant a price-target cut to $40 from $44 -- with the brokerage firm expecting third-quarter same-store sales to fall. Despite the selling pressure, options traders appear to be setting their sights higher.
Currently, M call options are being exchanged at twice the usual intraday rate. The 36 strike is very popular, with buy-to-open activity detected in both the October and November series, according to
Trade-Alert. By purchasing the near-the-money calls, traders are counting on the underlying to rebound above $36 by the respective expiration dates, at the close next Friday and Friday, Nov. 18.
Short-term calls have been popular for a while now. In fact, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.35 indicates calls nearly triple puts among options expiring in the next three months. Plus, this SOIR ranks in the call-skewed 6th annual percentile.
No matter the motive, now is a great time to purchase premium on short-term strikes. M's Schaeffer's Volatility Index (SVI) checks in at 30%, lower than 89% of all readings from the past year. Not to mention, the Schaeffer's Volatility Scorecard (SVS) of 95 suggests the stock has tended to make bigger-than-expected moves in the last 12 months, relative to what the options market has priced in.
Turning to the charts, Macy's Inc (NYSE:M) is currently clinging to a year-to-date lead of less than 2%. Looking more closely, given today's losses, the shares have more or less closed their bullish gap from the company's August earnings report.
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.