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M Covered Call

November 10, 2022
Roll Position: Against M Stock, Buy Back the November 20 Call (exp. 11/11) and Sell the November 20 Call (exp. 11/18)

The market is surging higher today after a “less hot” inflation report. The rally is fairly broad-based, though under the surface the leaders are mega-cap tech (AAPL/AMZN), as well as beaten-down tech (PYPL is rallying nicely). Whether this will be yet another bear market rally or the start of something much bigger is anyone’s guess (more on that below).

Moving on …

Tomorrow afternoon the Macy’s (M) November 20 call (exp. 11/11) that we sold for $0.57 will expire. With the stock trading marginally above the short strike price, let’s aggressively roll out of this position, lock in a profit of approximately $0.20 on the call that we sold, and then sell a new call that is very expensive heading into earnings next week.

To execute this trade you need to:

Buy to Close the M November 20 Call (exp. 11/11)

Sell to Open the M November 20 Call (exp. 11/18)

For example, you could buy back the November 20 call (exp. 11/11) for $0.37, and sell the November 20 call (exp. 11/18) for $1.37.

In terms of the market, I’m encouraged. And should this strong market reaction to the inflation data continue, I could easily see us adding even more bullish exposure in the coming days.

October 11, 2022
Adjust Existing Position/Note Exp. Date: Against Macy’s (M) Stock Position, Sell the November 20 Call (exp. 11/11) for $0.50 or more.

We have been patiently waiting for M stock to regain some of its recent decline, before selling a new call against our stock position. Today, the stock is trading higher by 5%, option volatility is elevated, and I am ready to sell a new call, targeting an expiration cycle before earnings are to be announced … though please note, the earnings date has not yet been officially set.

To execute this trade you need to:
Sell to Open the M November 20 Call (exp. 11/11)

As noted above, we are selling calls that are expiring on 11/11, which is not the “normal” expiration cycle.

After this trade is initiated, our M position will be:
Long M Stock
Short M November 20 call (exp. 11/11)

August 19, 2022
Roll Position: Buy Back your Macy’s (M) August 20 Call, and Sell the September 20 Call (exp. 9/16).

The M August 20 call that we sold for $0.43 is set to expire today. And while I would expect this August call will expire worthless, let’s roll the position today, so that we can collect a nice September premium.

To execute this trade you need to:
Buy to Close the August 20 Call
Sell to Open the September 20 Call

Please note, Macy’s will report earnings Tuesday morning before the open, and to be frank, I don’t expect the numbers to be great based on how M traded ahead of the recent market run.

However, because we are collecting such a large call premium ($1.25) and market conditions have been improving, I am going to roll this position today and take the earnings risk.

Finally, in terms of our JETS and ONON August covered calls, let’s let these positions play themselves out. Should the stocks close below our short strike prices, we will manage the stock positions on Monday. Conversely, should the stock close above the strike prices, we will walk away with our profits.

August 8, 2022
Adjust Existing Position: Against Macy’s (M) Stock, Sell the August 20 Calls (exp. 8/19) for $0.40 or more.

On Friday the M August 23 calls that we had sold for $0.90 expired worthless. Today, we are going to sell a new call, to again lower our cost basis.

Of note, one of the reasons we are selling a call expiring on August 19 is I would expect, though it has not yet been confirmed, that Macy’s will report earnings the week of August 26.

To execute this trade you need to:
Sell to Open the August 20 Call

This call sale will be a mistake if M explodes well above the 20 level by August expiration … and that is a possibility as the “trash” of the market has been racing higher in recent days.

June 24, 2022
Against Macy’s (M) Stock, Buy Back the July 24 Call, and Sell the August 23 Call (exp. 8/5) for $0.80 or more.

The market is potentially strengthening again, and I’m becoming slightly more encouraged. However, during bear markets there can be many short-term rallies that can then fail. In essence, we are in no-man’s land. However, that doesn’t mean we need to totally stay on the sidelines, which brings me to today’s adjustment.

The Macy’s (M) July 24 Call that we sold for $2.02, is now worth $0.25. We are going to lock in our profit of $177 per call sold today, and then sell a new call, LIKELY the week before Macy’s reports earnings, to again lower our cost basis.

To execute this trade you need to:
Buy to Close the July 24 Call


Sell to Open the August 23 Call (exp. 8/5)

For example, you can buy the July 24 call back for $0.25, and sell the August 23 call for $0.80 (approximately).

Please note, Macy’s has not yet declared its earnings date. However, I am using previous earnings reports as a tool to forecast the earnings date, which I would anticipate would be the week after our August call expires.

June 6, 2022
Covered Call: Buy Macy’s (M) Stock and Sell the July 24 Call (exp. 7/15) for a net price of $22.60 or less.

Two weeks ago, Macy’s (M) rose from 19 to 23 following earnings. This was an interesting stock move given the weakness in the retail sector. Since that initial move higher on earnings, M stock has grinded higher and is impressively trading higher again today following Target’s (TGT) second earnings warning in the last couple of weeks.

And of further interest to me is a steady flow of bullish option activity in M, including these trades made today:

Today – Buyer of 10,000 August 29 Calls for $1.13 – Stock at 24.5Today – Buyer of 2,000 June 25 Calls (exp. 6/10) for $0.40 – Stock at 24.5

While I think M stock looks good, I have less faith in the market and the retail stocks in the short term. For that reason, I am going to add M to the portfolio today via a defensive covered call.

To execute this trade you need to:
Buy M Stock
Sell to Open the July 24 Call

For example, you could buy M stock at 24.6, and sell the July 24 call at $2.

The most you can lose on this trade is $2,260 if M stock were to go to zero.

The most you can make on this trade is $140 per covered call, or a yield of 6.19% should M stock close above 24 on July expiration. (Of note, it is also likely that we will capture the $0.1575 dividend, however I will not include that in the profit potential or breakeven).

The breakeven on this trade is at 22.60.

Stepping back, much like all of our covered call trades, we won’t get too worked up by day-to-day price movement.

Position (Original) M July 24 Covered Call
Position StrategyCovered Call
Position StatusOpen
Opened DateJune 6, 2022
ExpirationJuly 15, 2022
Net Price22.47
Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.