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

J.C. Penney Company, Inc. option traders differ on short-term path

by 3/5/2014 2:26 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. One name of notable interest this afternoon is J.C. Penney Company, Inc. (NYSE:JCP).


J.C. Penney Company, Inc. calls and puts are trading near parity today, with roughly 28,000 of the former and 26,000 of the latter having crossed the tape thus far. This action just highlights a withstanding trend witnessed in JCP's options pits, as speculators are split on the struggling stock's trajectory. During the past 10 sessions, in fact, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 145,112 calls on JCP, compared to 130,346 puts. Even more telling, the resultant call/put volume ratio of 1.11 ranks in the middling 45th percentile of its annual range.

Short-term traders in particular are showing their faces today, as nine of the top 10 most active JCP options expire within the next three months. On the call side, the weekly 3/14 9 strike has received notable attention, and the majority of the 2,232 contracts traded here have done so at the ask price. Implied volatility (IV) is up 5.7 percentage points, and volume outstrips open interest, pointing to buy-to-open activity. With more than half of JCP's available float sold short, a portion of today's call buying at this out-of-the-money strike could be a result of short sellers picking up hedges against any additional upside over the next seven-plus sessions.

On the put side, the weekly 3/7 8 strike has seen 2,303 contracts cross the tape, mostly on the ask side. IV ticked higher at a number of the larger transactions, hinting at the initiation of new bearish positions. Delta for the put is docked at negative 0.30, suggesting a less than 1-in-3 chance the position will be in the money at this Friday's close, when the options expire. Should the equity remain perched atop the $8 mark through week's end, the most today's put buyers stand to lose is the initial premium paid. According to Trade-Alert, the volume-weighted average price for the puts is $0.10 apiece.

On the charts, J.C. Penney Company, Inc. (NYSE:JCP) has been a long-term laggard, with the shares off about 45% year-over-year. However, the stock has gained some momentum of late, adding close to 70% since hitting its record low of $4.90 in early February. In today's session, though, the equity has been wavering around breakeven, but was last seen 0.5% lower at $8.25. Considering the security's Relative Strength Index (RSI) of 70 is sitting in overbought territory, a near-term pullback may have been in the cards.


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