Put spread hits Macy's as shares fall
Chris McKhann | firstname.lastname@example.org
optionMONSTER's Depth Charge system detected the purchase of 1,095 June 44 puts for the ask price of $1.83 and the sale of 2,190 June 42 puts for the bid price of $1. This is a new put spread, as the volume dwarfed the previous open interest of fewer than 40 contracts at each strike.
With this vertical spread, also known as a ratio because of the differing number of contracts, the trader takes in a credit of $0.17. That will be the profit if M is above $44 at expiration. The maximum gain in the trade comes if shares trade down to $42, where the put spread has its maximum value as the addtional 42 puts expire worthless. The risk lies in the fact that the trader is effectively short shares below that lower strike. (See our Education section)
M is down 0.39 percent to $43.78, reversing lower after trading well above $44 this morning. The department-store operator hit a high of $45.39 two weeks ago but were down at $42 at the start of the month.