Watching Retailers Ahead of the Holidays

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Nov. 18 (Bloomberg) -- RBC Capital Markets Strategist Amy Wu discusses her play for the retail sector on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Discretionary outperform the markets this year.

Do you think they should be hedging the games going into the holiday season?

Is a great question.

If you look at retail etf, it is up 40% this year compared to the s and p come up around 25% or so.

From just a prophet taking perspective, it is really interesting to look at hedges right now.

Option prices are quite low, implied volatility is low and the downside protection using put options is at one year lows right now.

Not a lot of people are hedging.

Yes, it's funny because technically toward this end of the season people think about buying insurance.

We do not see that at all.

We see a great heel of complacency.

Seasonally toward this time of year, regardless of where you are, people are thinking about hedging to protect their games at the close on 2014. we do not see that at all so option prices are at record lows in terms of protecting that downside.

Do you think that is a mistake?

It is funny, it is a catch 22. you always want to hedge when the option prices are low and you don't want to be the boy who cried wolf.

What i would say is there are two notable points for retailers.

The first is there are six less shopping days this year compared to last year.

Thanksgiving happens relatively late in november compared to last year.

The year on year is going to look the bat.

People have less time to get their shopping done.

The second part is we continue to see the secular trend away from bricks and mortar shopping, going into a store versus buying online.

If you think about those two on the fundamental side, plus the fact that we are up 40%, it may be raised enough that we take a look at the hedge right now.

Amy will talking about the retail strategy and what she is seeing in the options market

This text has been automatically generated. It may not be 100% accurate.


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