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

JCP call sellers bet on a short-term ceiling

by 12/11/2013 2:06 PM
Stocks quoted in this article:

The 20 stocks listed in the table below 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. Three names of notable interest this afternoon are J.C. Penney Company, Inc. (NYSE:JCP), Yahoo! Inc. (NASDAQ:YHOO), and Microsoft Corporation (NASDAQ:MSFT).

Yahoo! Inc. optimists are eyeing a deeper move into multi-year high territory, and are purchasing (to open) April 2014 44-strike calls today. Meanwhile, option traders are hoping strong Xbox sales help boost Microsoft Corporation through the $39 mark by week's end. Roughly 5,450 weekly 12/13 39-strike calls have changed hands, a number of which have been bought to open. Finally, here's how traders are using options to call for a short-term ceiling for J.C. Penney Company, Inc.


After showing signs of life in November, J.C. Penney Company, Inc. has spent December in the red, with the shares off nearly 16% month-to-date. One group of speculators in today's session is betting on the technical turmoil to continue into the new year, and are targeting JCP's weekly 1/3 9.50-strike call. The vast majority of the 2,354 contracts traded here have done so on the bid side, and volume is outstripping open interest, pointing to sell-to-open activity.

Ideally, JCP will remain south of the $9.50 mark through the close on Jan. 3 (the stock was last seen lingering near $8.57). This will allow the calls to expire worthless, and the speculators to retain the initial net credit as their maximum potential reward. According to Trade-Alert, the volume-weighted average price for the calls is $0.28 apiece.

From a broader perspective, option traders have been buying to open calls (over puts) with some rapidity of late, per JCP's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.95, which ranks in the bullishly skewed 88th annual percentile. In the near term, this campaign for calls (some of which may be perpetuated by short sellers looking to hedge their bearish bets) could come back to haunt J.C. Penney Company, Inc. (NYSE:JCP) call buyers (and help today's call sellers). Specifically, in the front-month series, a heavy accumulation of call open interest resides at the overhead December 9 strike. This could translate into a layer of options-related resistance as the nearly 20,000 contracts -- most of which have been bought to open -- begin to unwind ahead of next Friday's close.


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