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Long-Term Option Bears Pounce On J.C. Penney Company, Inc. (JCP)

J.C. Penney Company, Inc.'s January 2015 series of options is attracting attention

by 5/28/2014 1:56 PM
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Option Brief: J.C. Penney Company, Inc. (NYSE:JCP) puts are trading at nearly double the pace of calls this afternoon. By the numbers, roughly 24,000 puts are on the tape, compared to 13,000 calls. Against this backdrop, JCP's 30-day at-the-money implied volatility (IV) has risen 3% to 48.9%, signaling increased demand for short-term options. However, it's longer-term contracts that are attracting the majority of the attention today.

Among the most active options is the January 2015 7-strike put, where 6,760 contracts -- including a 2,599-contract block -- have been exchanged. Almost all of the activity has transpired at the ask price, suggesting the JCP puts were bought, and IV is up 1.7 percentage points, conveying freshly minted bearish bets.

Today's put buyers expect shares of the retail chain to continue their long-term downtrend through January 2015 options expiration. At last check, J.C. Penney Company, Inc. (NYSE:JCP) was 1.6% lower at $8.71, bringing its year-over-year loss close to 54%. At-expiration breakeven for the trade is $6.22 -- strike price less the volume-weighted average price of $0.78 -- with additional gains to be had south of that point. On the flip side, the most the speculators have to lose is the initial premium paid, should JCP close above $7 at options expiration, roughly eight months from now.

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