Volume Spike Investor

Retailers are seeing a lot of options action today after Macy’s Inc. (NYSE: M)  fell 8% after reporting quarterly results, and Wal-Mart announced it expects a difficult holiday shopping season.  The names with the action will all report earnings this week, J.C. Penney Company, Inc. (NYSE: JCP), Wal-Mart Stores Inc. (NYSE: WMT) and Nordstrom Inc. (NYSE: JWN).

JC Penneys (JCP) puts are active ahead  of  11/13 earnings after Macy’s shares got hit on earnings, a close competitor.  At 11:46am 3,000 December $28 puts were bought and 3,000 December $27 puts were sold in an apparent bearish spread, but there was also a trade of 3,000 December $30 puts at $0.90, below the bid.  Shares are breaking down intraday and the action looks bearish in the options pits.  4X average put volume has traded already.

Nordstrom (JWN) is trading 11,555 calls and 17,246 puts ahead of tomorrow night’s earnings, around 4X average put volume and 2X call volume.  The  most  notable action was with the closing of November $35 call positions earlier, but now another large bearish trade hit, with a ratio put spread buyer in December, as the trader buys 3,000 December $35 puts and sells 6,000 December $32 puts for a 15 cent debit in a trade that is bearish on both price and the 49% implied volatility.

Wal-Mart (WMT)  will report earnings before the open tomorrow morning and is a key market mover as a great indicator of where the economy is, and where it is heading.  Shares are a bit higher today despite making cautious comments and 53,500 calls have traded and 12,700 puts, nearly 2X average call volume although a good deal is in selling calls.    The largest trade was early this morning at 9:45am with a trader selling 5,000 December $55 calls in a buy-write strategy, looking for shares to head a bit higher this year.  There is also a lot of closing trades in  the  November $52.50 calls today.

The best read from this is that option traders are positioning more positive for Wal-Mart as compared to the more pricey retailers, which is good for Wal-Mart, but could be a discouraging sign for how far along we are in an economic recovery.  Another trend to watch is that many of these retailers jumped on same store sales figures in November, and gave fairly strong guidance, so the reaction to the actual numbers have down as  the  least path of resistance, with much of the optimism already baked in.

Joe Kunkle, OptionsHawk.com

12:45 PM EST