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Most Active Options Update: J C Penney Company Inc (JCP)

Option bulls bet on J C Penney Company Inc to extend its lead above former round-number resistance

by 8/25/2014 10:14 AM
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 is J C Penney Company Inc (NYSE:JCP), which attracted some attention from bullish speculators last Friday.

Most Active Options Table

In Friday's session, the most active J C Penney Company Inc option by a mile was the October 10 call, where 16,445 contracts were exchanged. For comparison's sake, the runner-up was the expiring weekly 8/22 10-strike call, which traded volume of just 3,537 contracts.

It looks like most of the day's October 10 call volume was of the buy-to-open variety. About 85% of those calls crossed the tape at the ask price, implied volatility rose 3.4 percentage points to close at 43.2%, and open interest jumped over the weekend by 15,239 contracts -- all pointing to the initiation of new bullish bets on JCP.

The $10 level is a crucial one for JCP, as this psychologically significant price point marked tops for the shares in late 2013 and again in May 2014. However, the stock broke out into double-digit territory on Aug. 19, and hasn't looked back since. Going forward, the $10 region could switch roles to serve as support for the security -- and October 10 call buyers seem to be wagering on an extended rally from this area.

For the record, Friday's volume-weighted average price (VWAP) on the October 10 call was $0.76. If JCP is trading at or below $10 on expiration Friday, the most the traders stand to lose is that initial cost of $0.76 per contract.

In today's session, shares of J C Penney Company Inc (NYSE:JCP) are following the broader equities market higher, up 4.5% at $10.65. Meanwhile, the VWAP on the October 10 call has jumped to $1.04, which means Friday's buyers are already sitting on paper profits.


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