Wednesday November 4, 06:41 PM
STOCKS NEWS US-Goldman Sachs suggests Macy's call options
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1322 ET 04Nov2009 Goldman Sachs (NYSE: GS - news) suggests Macy's call options
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Buy Macy's Inc November calls ahead of upcoming monthly retail sales
on Thursday and Nov. 11 earnings, wrote Goldman Sachs derivative strategists in
a note. They expect October same-store sales results and earnings to be
positive catalysts due to cost-cutting efforts and revenue upside driven by
cooler weather and pent-up apparel demand. Macy's option prices appear low vs.
department store peers. The strategists estimate Macy's shares move on average
plus/minus 3 percent on same-store sales reported in November (Frankfurt: A0Z24E - news) over the past 10
years, however, the stock has moved on average more than 6 percent on retail
sales in the last 12 months. With shares at $17.77, Goldman recommends
investors purchase Macy's $19 calls for 55 cents. They estimate that investors
closing out this trade following retail sales and earnings would only need a 5
percent move to break-even assuming volatility declines by its 8-quarter median
of 8 percent.
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