) prepares to step into the earnings confessional next week,
bullish bettors are zeroing in on the stock today. Roughly 12,000
calls have crossed the tape thus far, which is about eight times
the norm. For comparison's sake, just over 8,200 puts have been
exchanged. Meanwhile, the equity's 30-day, at-the-money implied
volatility has ticked higher, up 1.6 percentage points (or 5.7%)
from yesterday's close.
The clear front-runner is the September 49 call, where north of
10,000 contracts have changed hands at a volume-weighted average
price (VWAP) of $1.32. Today's volume has exceeded current open
interest levels, signaling the addition of new positions. According
, a hefty portion of these calls were purchased by a single
speculator. In order for him to profit from these bought-to-open
contracts, M must ascend past breakeven at $50.32 (strike price
plus the VWAP) by back-month expiration. This reflects an increase
of 4.4% from the stock's present perch at $48.18. The delta for
these options sits at 0.43, meaning they have a 43% chance of
moving into the money by the close on Sept. 20.
This penchant for calls over puts is a deviation from M's recent
trend in the options pits. The security's 10-day International
Securities Exchange (ISE), Chicago Board Options Exchange (
), and NASDAQ OMX PHLX (PHLX) put/call volume ratio stands at 1.65,
indicating puts bought to open have easily outpaced calls during
the past two weeks. This ratio ranks higher than 88% of similar
readings taken over the past 12 months, meaning traders have been
scooping up puts over calls at a faster-than-usual pace.
Schaeffer's put/call open interest ratio (SOIR)
checks in at 1.43, conveying puts outnumber calls among options
with a shelf-life of three months or less. This ratio is just 7
percentage points shy of a 12-month peak, signaling near-term
speculators have rarely been more put-heavy toward the stock during
the past year. An unwinding of these bearish bets -- particularly
within the front-month series of options -- could end up serving as
a contrarian tailwind, as August expiration draws closer.
Technically speaking, Macy's had advanced close to 24% so far this
year. On the charts, the shares continue to hover above their
10-month moving average, which has served primarily as support
since April 2009.
As alluded to earlier, the retailer is due to report quarterly
earnings before the market opens on Wednesday, Aug. 14, and has
bested consensus bottom-line estimates in each of the past eight
quarters. On average, the stock has gone on to inch 0.2% higher a
week after posting. For the second quarter, analysts are expecting
a profit of 79 cents per share.
This article by Terri Stridsberg was originally published on
Schaeffer's Investment Research
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