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J.C. Penney Company, Inc. (JCP) Trader Thinks the Worst Is Yet to Come

J.C. Penney Company, Inc. option bear sees record-low territory on the horizon

by 2/7/2014 11:31 AM
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Option Brief: J.C. Penney Company, Inc. (NYSE:JCP) is on the mend, after bottoming out at a record low of $4.90 this week. One speculator in today's session thinks the recent price action is just a dead-cat bounce, though, and bet on additional losses over the next several months.

Specifically, one massive block of JCP's May 6 puts changed hands earlier near the ask price for $1.37, pointing to buyer-driven activity. What's more, implied volatility rose 4.0 percentage points at the transaction, hinting at the initiation of new positions.

With JCP trading at $5.73, these puts are currently in the money. However, breakeven (at expiration) for the speculator is $4.63, or the strike price minus the premium paid. Risk, meanwhile, is capped at the initial cash outlay -- or $1.37 million for today's put buyer (the number of contracts, times the premium paid, times 100 shares).

On the charts, today's positive price action isn't reflective of JCP's longer-term performance, with the shares off roughly 70% year-over-year. Off the charts, J.C. Penney Company, Inc. (NYSE:JCP) will report fourth-quarter earnings after the close on Wednesday, Feb. 26. Analysts are expecting a per-share loss of 80 cents -- a 59% improvement over the retailer's year-ago results.


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