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Buyers shop for new highs at Macy's

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Macy's attracted bullish option activity yesterday as shares climbed to levels not seen in nearly six years.

More than 3,700 April 46 calls traded in a heavy buying pattern as premiums rose from $0.10 to $0.16, according to optionMONSTER's Heat Seeker system. The volume was 5 times higher than the strike's open interest of just 706 contracts before the day's trading began, indicating that these are new positions.

M gained 2.11 percent to close at $42.55 yesterday after peaking at $42.78 earlier in the session, its highest intraday price since July 2007. The department-store operator had been trading sideways before reporting strong fourth-quarter results in late February, and shares have been trending higher since then.

The calls bought yesterday, which lock in the purchase price for the stock no matter how high it might rise, are looking Macy's shares to gain roughly 8.5 percent or more in the next month. The options could be sold at a profit earlier if the stock rallies before then, but they will expire worthless if it remains below the $46 strike price. (See our Education section)

Total option volume in the name exceeded 8,600 contracts yesterday, 2.5 times its daily average in the last month. Calls outnumbered puts by more than 4 to 1.

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