Investors in Macy’s stock (NYSE:M), in light of recent developments in the options market, are strongly encouraged to maintain a vigilant watch on the firm. This is because the stock option for the September 30, 2022, $5.00 Call has some of the most significant implied volatility of any stock option currently available on the market.
What does “Implied Volatility” Actually Mean?
The market’s expectations for the amount of movement in the future are reflected in the implied volatility. Options with high implied volatility suggest that investors in the underlying equities anticipate a significant movement in either direction. It could also indicate that an important event is coming up that will result in a significant rally or sell-off. Implied volatility is just one component of the whole picture when it comes to formulating a strategy for trading options.
Market Analysis of Macy’s Stock
It is quite evident that options traders are factoring in a massive price increase for Macy’s stock (NYSE:M), but what about the fundamentals of the company? Macy’s currently holds the third position (Hold) in our Zacks Industry Rank for Retail – Regional Department Stores, placing it in the top 39% of all industries. Within the past 60 days, not a single analyst has revised their profit estimates for the current quarter, while five have done the opposite and lowered their expectations. As a direct consequence of this development, the current quarter’s Zacks Consensus Estimate has been reduced from 48 cents to 18 cents.
The current consensus among market analysts for Macy’s stock (NYSE:M) suggests that this high implied volatility could point to the formation of a trade. To make a profit trading options, traders will frequently look for contracts that have high implied volatility. Many seasoned traders use this strategy because it captures decay. At the expiration time, these traders’ goal is that the underlying stock will not move as much as anticipated.
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