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J.C. Penney Company, Inc. (JCP) Put Buyers Eye Long-Term Drop

Deep out-of-the-money J.C. Penney Company, Inc. puts were popular yesterday

by 1/28/2014 10:56 AM
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J.C. Penney Company, Inc. (NYSE:JCP) put volume ran at about three-quarters of its typical daily rate yesterday, but still managed to triple the number of calls traded. Moreover, a pair of out-of-the-money (OOTM) LEAPS received considerable attention. Specifically, Monday's most active JCP options were the January 2015 3-strike and 5-strike puts.

Digging deeper, 10,710 contracts traded at the lower strike, and 20,660 at the higher, with the majority exchanged at the ask price. Open interest soared overnight at both strikes, as well, indicating new positions were initiated. However, given the deep OOTM status of both LEAPS -- JCP was last seen a penny higher at $6.52 this morning -- it's possible that a portion of yesterday's put buying was the work of shareholders looking to hedge their long stock positions. (In fact, Trade-Alert reported that a 10,000-lot of January 2015 5-strike puts traded yesterday was tied to stock.)

Monday's preference for JCP put buying (over call buying) was business as usual for option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock has racked up a 10-day put/call volume ratio of 1.17, with long puts outweighing calls. Furthermore, this ratio ranks higher than 80% of comparable readings from the past year, meaning option traders have purchased JCP puts with greater rapidity than usual, relatively speaking.

Finally, on a fundamental note, J.C. Penney Company, Inc.'s (NYSE:JCP) board of directors has decided to amend and extend the retailer's stockholder rights plan. The threshold for the poison pill is set at 4.9% of the company's outstanding common shares.


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