Option Writers Newsletter, Sunday, 01/23/2005 11:20:51 AM ET
HAVING TROUBLE PRINTING?
MAY - May Department Stores $32.80
May Department Stores operates six major department store
divisions in the United States. The department store divisions
are Lord & Taylor; Filene's and Kaufmann's; Robinsons-May and
Meier & Frank; Foley's, and Famous-Barr, L.S. Ayres and The
Jones Store; and Hecht's and Strawbridge's. May National Bank
of Ohio, an indirect subsidiary, extends credit to customers
of May's six department store divisions. May Merchandising
Company, an indirect subsidiary, works closely with its six
department store divisions and merchandise vendors to identify
emerging fashion trends and to develop merchandise assortments.
Shares of MAY rallied earlier this week after the company became
the target of merger/acquisition rumors. The Wall Street Journal,
citing unidentified people familiar with the talks, reported that
Federated Department Stores (NYSE:FD) is negotiating to buy
MAY and create a $30 billion company with 1,000 stores. Even
if the "buy-out" does not occur, analysts say the company will
benefit from changes in the wake of the outgoing CEO, Gene
Kahn, who recently departed the firm.
Our technical analysis suggests that a consolidation is likely but
with all the attention focused on the future of the company, MAY's
share value should remain in the high $20 range for the next few
weeks. Traders could target a slightly higher price for the option
to take advantage of any near-term selling pressure in the issue.
Sell Put FEB 27.50 MAY-NY
Current Bid = $0.30 Open Interest = 23
Potential Profit (5 contracts) = $150
Return on Investment (max) = 4.2%
Cost Basis in Stock = $27.20
Days to Expiration = 27