Macy’s (M) is scheduled to report earnings before the market open Wednesday.  Macy’s made headlines earlier this year, announcing it would open its door to Black Friday shoppers at 8 pm Thanksgiving evening.

Macy’s is a holding company headquartered in Cincinnati, OH, and is best known as the owner of department stores Macy’s and Bloomingdales, and their approximately 850 locations.  Shares closed Monday’s session at $47.07 and are down in pre-market trading.  M shares are trading in a 52-week range of $36.30-$50.77, having hit a 52-week high on July 9.  The stock is up nearly 23% year to date, having slightly outperformed the market.

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Analysts are estimating EPS of $0.39 on about $6.19 billion in revenue.  The stock has moved higher on earnings 4 of the past 8 quarters, with an average move of around 3.1%. By looking at the near-term, at-the-money M Nov 47 Straddle price at about $1.95, we can see the options market is implying roughly a 4.1% prior to expiration. 

MY TRADE

Buy the M Nov 48-49 Call Spread for $0.25
Risk: $25 per 1 Lot
Reward: $75 Per 1 Lot
Break-even: $48.25

GREEKS OF THIS TRADE

Delta: Long
Gamma: Long
Theta: Short
Vega: Long

I like this trade because it offers a favorable Risk:Reward setup (the potential to earn 3:1 on my money), and the upside strike price is aligned with the measured move target.

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