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What Options Say About Macy's

At least one big investor thinks Macy's is stuck in a range and wrote options to earn premium.

OptionMonster's tracking systems detected the sale of about 4,500 November 19 calls for $0.75. Almost simultaneously, some 3,700 November 14 puts were sold for $1.35. Volume was more than four times open interest in both strikes.

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CNBC/OptionMonster Options Trading School:

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Macy's stock (M) fell 3.56 percent to $15.42 in morning trading and is up 46 percent in the last month. Last week, the department-store operator reported a greater-than expected 10.7 percent drop in July same-store sales. The next catalyst that could move the shares is the release of second- quarter results on Aug. 12.

The options trades will profit if M stays between $21.10 and $11.90 by expiration. It will also benefit from lower levels of implied volatility, which was 61 percent on the name today. Volatility on M has fallen by about one-third over the past six months, compared with more than a 50 percent drop for the broader S&P 500.

Today's trade resembles the strategy of "selling a strangle," although it wasn't technically because the number of puts and calls involved were not identical.

Overall options volume in the name was 70 percent above average, while the number of contracts sold was more than five times the normal amount

Disclosure:

I do not have any position in Macy's.

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Other Top Retailers:

Saks

Limited Brands

Target

Gap

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Kurt Oeler is vice president and general manager of OptionMonster.

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