Department store chain
Macy’s (M) has traded flat over the past year, as the company has been targeted for a buyout, but rejected that offer. One trader sees shares trending lower into next year.
That’s based on the February 2025 $15 puts. With 205 days until expiration, 3,325 contracts traded compared to a prior open interest of 114, for a 29-fold rise in volume on the trade. The buyer of the puts paid $1.22 to make the bearish bet.
Macy’s recently traded for about $17, meaning shares would need to decline by $2, or about 12%, for the option to move in-the-money. The $15 strike price is about midway between the stock’s 52-week high and low.
Operationally, revenues have been flat over the past year, but earnings are down by 60%. The department store chain barely turned a profit last year, and shares trade at over 500 times forward earnings.
Action to take: Shares have been setting a series of lower lows gradually since September. Investors may want to avoid Macy’s and look for safer plays in the retail space.
Even though shares pay a 4.2% dividend at current prices, that dividend isn’t sustainable based on current earnings.
For traders, the February $15 puts are reasonably priced for a down move over the next several months. Looks for high double-digit returns on the trade, which can likely be exited well before expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
