M Analysis

Macy’s (M)

Update 5/15/2017: M gapped sharply to the downside the immediately after earnings were published and continued to decline in the ensuing two trading days. I exited the position for a debit of $3.65.

Shares declined by 19.9% over five days, or a -1,437% annual rate. The options position produced a -42.5% loss on debit for a -3,100% annual rate.

M publishes earnings on Thursday before the opening bell.

I shall use the series of weekly options that trade for the last time nine days hence, on May 19.

Implied volatility stands at 47%, which is 4.7 times the VIX, a measure of the volatility of the S&P 500 index.

M’s IV stands in the 88th percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $29.56.

Premium: $2.10 Expire OTM  
M-iron fly Strike Odds Delta
Long 34.00 91.3% 11
Break-even 31.60
Short 29.50 52.1% 52
Short 29.50 48.0% 48
Break-even 28.10
Long 26.00 87.4% 11

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 1.1:1.

Decision for My Account

I have entered a position on M as described above. The stock at the time of entry was priced at $29.54.

By Tim Bovee, Portland, Oregon, May 10, 2017

2 thoughts on “M Analysis

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