Sell volatility on the spike post numbers.
Updated
POOR FUNDAMENTALS CONFIRMED
Macy's just released disappointing sales figures and guidance.
Announcing 68 store closures and the layoff of 10,000 employees.
The stock is indicated 10% down to 32.20.
Consensus is already quite down-beat on the story, and likely to become even more so.
Expect downgrades on the back of the news.
VOLATILITY PICKUP EXPECTED
The negative trend has been playing out and at the current pre-market price the stock is already down 30% from the top. It is likely to be oversold at the open and the volatility should soar.
SELL OTM SHORT-DATED PUTS
The 10% OTM puts maturing 20 Jan 2017 were paying 14.9% per annum at the close of yesterday.
At the open, similar options should pay even more dearly for investors willing to take the risk.
In the worst-case scenario, get long the stock 40% below the recent top.
Sell M 20jan17 10% OTM ($29) puts and expect >15% annualized - Will confirm pricing after the open.
Macy's just released disappointing sales figures and guidance.
Announcing 68 store closures and the layoff of 10,000 employees.
The stock is indicated 10% down to 32.20.
Consensus is already quite down-beat on the story, and likely to become even more so.
Expect downgrades on the back of the news.
VOLATILITY PICKUP EXPECTED
The negative trend has been playing out and at the current pre-market price the stock is already down 30% from the top. It is likely to be oversold at the open and the volatility should soar.
SELL OTM SHORT-DATED PUTS
The 10% OTM puts maturing 20 Jan 2017 were paying 14.9% per annum at the close of yesterday.
At the open, similar options should pay even more dearly for investors willing to take the risk.
In the worst-case scenario, get long the stock 40% below the recent top.
Sell M 20jan17 10% OTM ($29) puts and expect >15% annualized - Will confirm pricing after the open.
Trade active
At the close of last week, the 5d historical volatility had nearly tripled to 122.5% from its 50d level of 47.4%. This is definitely the type of spike we would like to take advantage of. I highlight below 2 puts worth selling, with indicative closing prices from the previous session. The second gives earnings exposure (earnings publication expected Feb 21).1. Sell M 17Feb'17 PUT $29 = 0.71/share => 2.30% in 39 days or 21.56% p.a.
2. Sell M 19May'17 PUT $28 = 1.60/share => 5.19% in 130 days or 14.58% p.a.
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