Microsoft & Macy’s – Bifurcation in Markets – April 27th, 2020
Bullish – MSFT – $174.55
Bearish – M – $5.02
MSFT – Bullish Earning Play:
With earnings this week, Microsoft’s recent relative strength and analyst revisions provide a strong indication of a beat on earnings. With a 32% gain, this past month suggests limited upside for MSFT this week. Expecting MSFT hold these levels on earnings, Tony suggests Selling a June 5 $172.5/$162.50 Put Vertical @ $4.00 Credit. As of Friday’s close, these puts were trading at $3.75 Credit.
M Bearish Idea:
On CNBC’s OptionsAction show on Friday, Courtney Reagan reported on the devastation on retail from COVID-19. With retailers seeing a bifurcation with digital vs. physical store strategies, Macy’s is scrambling for liquidity and we expect to see further weakness as it expects to sit out the initial reopening of the economy. Expecting Macy’s to decline, Tony suggests buying a June $3/4/5 Put Butterfly @ $0.17 Debit. As of Friday’s close, these puts were trading at $0.19 Debit.
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