Large Macy's Option Trader bets on a rebound year

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<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Macy's Inc (NYSE: M) was one of the Worst performing stocks across S&P 500 in 2019, but at least one large option trader is betting on a Macy's upswing in 2020. "data-reactid =" 18 ">Macy's Inc (NYSE: M) was one of the worst performing stocks in the entire S&P 500 in 2019, but at least one major option trader is betting on a Macy's recovery in 2020.

On Friday, two large Macy bullish option trades suggest that Macy's may find a way to stop the bleeding this year.

The trades

<p class = "canvas-atom canvas-text MB (1.0em) MB (0) – SM MB (0.8em) – SM" type = "text" content = "On Friday, Benzinga Pro Subscribers received two option notifications regarding unusually large trades from Macy's options. Here are some of the biggest ones: "data-reactid =" 21 "> On Friday, Benzinga Pro subscribers received two option notifications on unusually large trades from Macy's options. Here are some of the biggest ones:

  • At 11:02 a.m., a trader bought 1,000 Macy's call options with an exercise price of $ 15 that expired in January 2021 at a ask price of $ 3.25. The trade was a bullish bet of $ 325,000.
  • At 11:05 a.m., a trader bought 670 Macy's call options with an exercise price of $ 17 that expired on January 17, 2020 near the ask price at 43 cents. The trade was a bullish bet of $ 28,810.

Why is it important?

Even traders who only stick to stocks often closely monitor the activity of the options market when unusually large trades are made. Given the relative complexity of the options market, large option traders are typically viewed as more demanding than the average stock trader.

Many of these large option traders are wealthy individuals or institutions that may have clear information or theses about the underlying stock.

Unfortunately, equity traders often use the options market to hedge against their larger equity positions, and there is no sure way to determine whether an options trade is a standalone position or a hedge. In this case, it is unlikely that it is a hedge, since the two Macy's degrees are relatively modest in institutional comparison.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "See also: Major Apple Option Traders will start buying strong calls in 2020 "data-reactid =" 29 ">See also: Large Apple Option Traders will start 2020 with the purchase of Heavy Call

Can Macys find an answer?

Macy's stock underperformed in 2019, largely due to the headwind of online competitors, which many experts believe will not subside in 2020.

A recent UBS survey found that 25% of U.S. apparel sales are now made online. UBS said the stake is expected to increase to 31% by 2023. This trend is not good for retailers in malls like Macy's, which face the huge Christmas quarter earnings report expected in late February.

In November, Macy's saw sales drop 3.5% in the same business, worse than analysts expected. Management also said the company's online sales growth had declined in the last quarter and Macy's online market share had declined due to lower prices from competitors.

Even after a tough year, Wall Street doesn't expect Macy to make it easier in 2020. In December, Morgan Stanley confirmed its underweight rating and lowered its target price to just $ 13.

Gasoline gas take

The good news for Macy's bulls is that the larger of the two Friday transactions involves calls that expire after another year, suggesting that it's not just a short-term technical recovery.

In fact, Macy's calls in January 2021 have a breakeven price of $ 18.25, meaning the stock will grow at least 10.5% over the next 12 months.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Do you agree with this assumption? E-mail feedback@benzinga.com with your thoughts."data-reactid =" 38 ">Do you agree with this assumption? Send an email with your thoughts to feedback@benzinga.com.

<p class = "canvas-atom canvas-text Mb (1,0em) Mb (0) – sm Mt (0,8em) – sm" type = "text" content = "Photo credit: Caldorwards4, Wikimedia"data-reactid =" 39 ">Photo credit: Caldorwards4, Wikimedia

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