Stocks quoted in this article:
Option Brief: Following last week's notable declines -- which were sparked by the firm's holiday sales data (or lack thereof) -- J.C. Penney Company, Inc. (NYSE:JCP) shares are taking it on the chin again today, off 5.7% to hover at $6.92. Meanwhile, the stock's options pits are brimming with activity, as roughly 57,000 contracts have switched hands -- more than double the intraday norm.
One of the more popular positions on the call side is the February 15 strike, where most of the 3,201 contracts that traded here did so in one large block for an ask price of $0.01. Because implied volatility (IV) spiked by 10.1 percentage points at the transaction, it's possible that new bullish bets were added here. If the calls were, in fact, bought to open, the speculator is counting on JCP to muscle north of $15 by February options expiration -- a move that would require the shares to more than double in price over the next six weeks. Considering short interest accounts for 38.6% of the stock's available float, it's possible that the trader is a short seller looking to hedge his bearish bets by purchasing out-of-the-money calls.
Elsewhere, close to 7,100 puts have been exchanged at the January 2014 6 strike. Since 82% of these contracts crossed at the ask price -- and IV has ticked higher -- it's likely that fresh long positions were initiated here, as well. In this case, however, the traders are expecting JCP to fall south of the $6 mark by this Friday's close, when front-month options expire.
As alluded to earlier, J.C. Penney Company, Inc. (NYSE:JCP) has been a technical laggard, shedding roughly 62% year-over-year, and more recently, trailing the broader S&P 500 Index (SPX) by north of 18 percentage points during the past two months. On the charts, the stock is already on pace to finish a second consecutive week below its 10-week moving average, which had served as support since November.