Macy's Options

When a company makes an announcement, most people do not consider that many of these announcements are in fact real options. For example, yesterday Macy's made two separate announcements that are both real options. First, the company announced that it would close 35-40 underperforming stores, the option to abandon. Next, the company announced that it would open Best Buy outlets in 10 of its stores. While this is a small capital budgeting decision, it is an option to expand as Macy's and Best Buy both hope the combination is successful, in which case more Macy's will feature a Best Buy outlet.