Macy's Shows Huge, Unusual Put Option Volume - Is M Stock Set To Drop Or Is It Cheap Here?

There is a massive volume of in-the-money (ITM) Macy's Inc. (M) put options today. Do investors believe M will drop precipitously ahead of earnings, or is this a buying play? It could be both.

M is at $23.66 in midday trading, down slightly. Over th last two to four months, M stock has been essentially flat, as the Barchart chart below shows.

M stock - last 6 months - Barchart - Oct. 19, 2026

The department store is set to release earnings on Dec. 11, over a month and a half from now. So, why is there so much heavy put option activity?

Barchart's Unusual Stock Options Activity Report today shows this. Over 62,000 puts have traded at the $25.00 strike expiring on Jan. 15, 2027. That's well after its upcoming earnings report (88 days until expiry)

Moreover, the volume is over 175 times the number of contracts previously outstanding at the $25.00 strike price for that period. This is the highest Volume/Outstanding Interest (VOL/OI) ratio today in Barchart's table.

M puts expiring Jan. 15, 2027 - Barchart Unusual Stock Options Activity Report - Oct. 19, 2026

Buyers of these puts paid a premium of $2.66. That means they only make money if M falls below $22.34, which is about 5.57% below today's price.

On the other hand, put sellers have locked in a yield of 10.64% (i.e., $2.66/$25.00), assuming M stock rises over $25.00. They also have a breakeven buy-in of $22.34 if M stock stays flat.

There could also be numerous other put credit and multi-leg options plays traded here. But this heavy volume of an in-the-money put is not uncharacteristic of heavy directional trades - i.e., long M or short M plays.

So, does Macy's stock look cheap here, or is it undervalued?

Where Analysts Stand on M Stock

Thirteen analysts surveyed by Yahoo! Finance have an average price target of $23.18 per share. That's slightly lower than today's price (-2.0%). Barchart's survey is similar.

Moreover, analysts project negative earnings per share (EPS) for Q3 (-$0.18), and 10 out of 12 analysts have lowered their forecasts. In addition, revenue is forecast to decline 0.7% from $4.71 billion to $4.68 billion for the quarter ending Oct. 31.

This could be driving the negative sentiment on M stock that led to this huge put option activity.

In addition, M stock may not be cheap according to historical standards. The negative forecasts may not yet be incorporated into the stock price.

For example, Seeking Alpha reports that the average forward price/earnings (P/E) ratio has been 6.60x for the past 5 years. But, using analysts' EPS forecasts for the year ending Jan. 31, 2027, M stock is trading on a forward P/E of 10.36x this year, and 10x next year.

Summary and Conclusion

So, is there any good news or hope for value investors? After all, Macy's is still generating positive free cash flow (FCF), albeit on a much lower level than last year. It produced $229 million in FCF last quarter, down just 4.58%, according to Stock Analysis. If it can continue making positive FCF, the stock may have reached a bottom.

That highlights the fact that M stock could be near its lows. For example, around Sept. 10 (its last earnings release), M stock seemed to bottom out in the low $21 range.

That means that the potential buy-in of put sellers at $22.34, with today's heavy in-the-money (ITM) put volume, might make sense for potential value buyers.

The bottom line is that investors seem negative on M stock, as evidenced by heavy put option buying today. But that could offer some long-term investors a good buy-in point.