Stocks quoted in this article:
The 20 stocks listed in the table below are the S&P 400 MidCap Index (MID) components that have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest today is J C Penney Company Inc (NYSE:JCP), which has been heavily targeted by call buyers.
J C Penney Company is bucking the broad-market trend lower today, with the shares last seen 0.5% higher to wink at the $9.43 level. Ahead of the company's turn in the earnings confessional on Aug. 14, option buyers are rolling the dice on double-digit territory for JCP.
Already today, the retailer has seen roughly 27,000 calls cross the tape -- more than double the number of puts exchanged, and twice its average intraday call volume. Most of the action has transpired at the August 10 call, where more than 8,100 contracts have traded. About three-quarters of the calls crossed on the ask side, and implied volatility has popped 12.3 percentage points at the strike, collectively pointing to newly bought bullish bets.
The calls were purchased for a volume-weighted average price (VWAP) of $0.32, making at-expiration breakeven $10.32 (strike plus VWAP) on Friday, Aug. 15 -- just a session after the aforementioned earnings release. JCP hasn't traded north of $10 at all in 2014.
Profit potential is theoretically unlimited north of breakeven, while the most the traders can lose is the initial premium paid, should JCP remain south of $10 through the option's lifetime. Delta on the calls currently rests at 0.37, indicating a roughly 37% chance of an in-the-money finish.
If recent history is any indicator, J C Penney Company Inc (NYSE:JCP) could, in fact, stage a post-earnings rally. While the company has fallen short of the Street's bottom-line estimates in six of the past eight quarters, the stock averages a one-day post-earnings gain of 4.5%. Narrowing that to the firm's last four earnings reports, the stock has skyrocketed 14%, on average, in the subsequent session.