Getty Images / Stephanie Keith
- Macy's reported strong quarterly and full-year 2017 earnings on Tuesday, sending its stock soaring as much as 13%.
- The share gain was bad news for Macy's bears, who had increased bets against the company heading into the report.
Amid repeated warnings that the
It's a lesson Macy's skeptics learned the hard way on Tuesday, after the company reported fourth-quarter and full-year earnings that smashed Wall Street estimates and sent the company's stock soaring as much as 13%.
In the weeks ahead of the earnings report and its associated stock spike, investors were paying the highest premium in a year to protect against a decline in Macy's shares over the next three months, relative to bullish bets, according to Bloomberg data. The measure - known as skew - can become elevated during times of worry as traders start to pay up for hedges.
Business Insider / Joe Ciolli, data from Bloomberg
Heading into Macy's earnings, traders were paying the highest premium in a year to protect against a 10% decline over 3 months, relative to an increase.
Another group of Macy's pessimists - short sellers - found themselves similarly ill-positioned for the company's stock spike. They boosted short positions, or wagers Macy's shares would drop, by roughly $250 million (27%) in the six months leading up to the earnings report, according to data compiled by financial analytics firm S3 Partners.
Including Tuesday's gain, Macy's is now up roughly 20% this year - hardly the type of performance that makes money for short sellers. For the time being, it would seem retail apocalypse enthusiasts are best off placing their pessimistic bets elsewhere.
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