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

Could J.C. Penney Company, Inc. be headed for new-low territory?

by 2/14/2014 2:58 PM
Stocks quoted in this article:

The 20 stocks listed below have seen the highest total options volume over the course of the last 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 stock seeing notable activity on the put side of the fence today is J.C. Penney Company, Inc. (NYSE:JCP).

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Public relations snafus and struggling sales have plagued JCP for the last couple of years, and just last week the stock tumbled to an unprecedented low of $4.90. The worst could still be around the bend, according to some speculators, who scooped up longer-term, out-of-the-money puts in today's session.

Most active in the JCP option pits today is the January 2015 4-strike put, which has seen more than 4,700 contracts change hands, the lion's share of which traded at the ask price. If these are in fact being purchased to open, they represent bets that JCP shares will tumble an additional 35% from their current price of $6.18, between now and expiration. While there are roughly 11 months until these LEAPS cease to exist, the options market does not think an in-the-money finish is terribly likely. Currently, delta stands at negative 0.17, pointing to a less than 1-in-5 chance the stock will be trading south of $4 at January expiration.

Given the stock's technical turmoil, it's not surprising that puts have been a favorite among the speculative crowd of late. During the past 10 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than 97,500 puts have been purchased to open versus 78,450 calls. The resulting put/call volume ratio of 1.24 is higher than 81% of similar readings taken during the last year, pointing to increased demand for long puts versus long calls. Similarly, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.50 rests in the 84th annual percentile. In other words, short-term option players are more put-focused than usual.

J.C. Penney Company, Inc. (NYSE:JCP) is headed to the earnings confessional on Wednesday, Feb. 26, and analysts are expecting a per-share loss of 82 cents, which is an improvement from the retailer's year-ago deficit of $1.95 per share. JCP has handed in seven consecutive negative earnings surprises, posting an average loss of 7.8% in the subsequent week. Following its last three earnings reports, however, JCP shares have actually moved higher in the week after the news.


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