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Calls have been the options of choice on J.C. Penney Company, Inc. (NYSE:JCP) of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, over the past 50 sessions on these three major exchanges, JCP has racked up a call/put volume ratio of 1.45, which ranks in the 87th percentile of its annual range. In simpler terms, calls have been bought to open over puts with more rapidity just 13% of the time within the past year.
This call-skewed set-up is being witnessed in today's session, too, with calls outpacing puts by a more than 2-to-1 margin. The most active strike is JCP's May 9 call, where 4,375 contracts have changed hands. Nearly all of these contracts have crossed on the ask side, and implied volatility is up 3 percentage points, hinting at the purchase of new positions.
By purchasing these front-month calls, the expectation is for JCP to topple the $9 mark -- a hope shared by Monday's options bulls -- by the close on Friday, May 16, when the options expire. Risk is limited to the initial premium paid, which according to Trade-Alert arrives at a volume-weighted average price of $0.36.
On the charts, JCP's long-term technical troubles have been fodder for the Street for some time. In fact, since hitting their February 2012 high of $43.18 -- a move that was promptly rejected by the stock's 80-month moving average -- the shares have shed nearly 80% to trade at $8.68. More recently, the equity has shown some signs of life since bouncing off of the $7 area in mid-April, and for this week, J.C. Penney is on pace to add about 9%.
In light of this, as well as the fact that nearly one-third of the stock's float is sold short, a portion of the recent call activity -- particularly at out-of-the-money strikes -- could be at the hands of short sellers hedging against any additional upside. Of note: The company is slated to report quarterly earnings the evening prior to May options expiration. Following its last turn in the earnings confessional in late February, J.C. Penney Company, Inc. (NYSE:JCP) tacked on an impressive 25.3% in the subsequent session.