On CNBC's Options Action, Dan Nathan spoke about the retail space and he suggested that viewers should consider a bullish options trade in Macy's, Inc. M.
Nathan believes that consumers could start spending their savings from low energy prices and the price of cotton could increase margins for the retailers. Besides having a positive fundamental view on Macy's he is also encouraged by a big out of the money call options activity in the name. When the stock was trading at $51 there was a buyer of 10,000 contracts of the January 62.5 call options.
Macy's is trading 30 percent lower from its highs, but Nathan believes that it could rebound because in this year the company was focused on investment and the profits should come in the next year.
To make a bullish bet, Nathan wants to buy the January 52.5 / 62.5 call spread for $2.50. The maximal profit for the trade is $7.50 if the stock moves to $62.5 at the January expiration. The trade breaks even at $55.
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