Mike Khouw's Macy's Options Trade

On CNBC's "Options Action," Mike Khouw suggested that traders should consider a bullish options trade in Macy's Inc M. He said Macy's has a lot of debt and its equity is relatively volatile so options premiums are expensive.

To offset some of the premium Khouw wants to buy the in-the-money, July $16 call and sell the July $22 call for a total cost of $2.06. The trade breaks even at $18.06, which is just below the closing price on Friday. If the stock trades to $22 or higher, the trade is going to reach its maximal profit of $3.96.

Carter Worth of Cornerstone Macro sees some bullish technical signs in the name. He noticed a wedge technical pattern and a head and shoulders bottom pattern. He is betting the stock is heading up.

Tony Zhang doesn't love the fundamentals of the stock, but he sees some potential from a technical standpoint. The company is going to report earnings on Tuesday and in case of a positive surprise, Zhang expects a move to $26 or $27. He would use an out-of-the-money call spread because he wants to risk less. Instead of paying 11% of the stock price, as Khouw suggested, Zhang would pay around 5% because he believes the probability for a breakout above $20 is low.