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

J.C. Penney Company, Inc. option bears scramble to place pre-earnings bets

by 5/15/2014 1:36 PM
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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 among pre-earnings options traders this afternoon is J.C. Penney Company, Inc. (NYSE:JCP). Meanwhile, dropping off the list since last time were Citigroup Inc (NYSE:C), Ford Motor Company (NYSE:F), and Zynga Inc (NASDAQ:ZNGA).


All eyes will be on J.C. Penney Company, Inc. after the close, when the retailer unveils its first-quarter earnings report. Ahead of the scheduled event, puts are flying off the shelves at a rate three times the intraday average. At last check, eight of the 10 most active options are due to expire in the next six weeks, sending JCP's 30-day at-the-money implied volatility (IV) up 5.9% to 76.6% -- its loftiest perch since late February. Diving deeper, it appears a number of traders are hoping that recent past is not prologue, and are betting on a poorly received reaction to the numbers.

Receiving notable attention in JCP's options pits this afternoon is the June 7 put, where almost all of the 8,060 contracts traded have done so on the ask side, pointing to buyer-driven activity. Meanwhile, IV is on the rise, and volume easily outstrips existing open interest, making it safe to assume that new bearish positions are being initiated. The volume-weighted average price (VWAP) for the deep out-of-the-money puts is $0.33, making breakeven at the close on Friday, June 20 -- when back-month options expire -- $6.67 (strike minus VWAP). JCP has not traded south of this at-expiration breakeven mark since Feb. 26 -- the session prior to its last quarterly earnings report.

In fact, JCP rallied more than 25% in the session immediately following its fourth-quarter bottom-line beat in late February. Widening the time frame, the equity has averaged a single-session post-earnings advance of 8.9% over the past four quarters, which widens to a 12.7% gain going out one week. For the company's first quarter, analysts are calling for a per-share loss of $1.25 -- a 13-cent improvement over year-ago results. In addition to earnings, the company's annual shareholder meeting is slated for tomorrow morning, which could also serve as a catalyst for the stock.

It should be noted, though, that although J.C. Penney Company, Inc. (NYSE:JCP) has performed well in the wake of its recent earnings reports, the equity has experienced some technical turmoil this week. Specifically, since ending Monday's session at a year-to-date closing high of $9.18, shares of JCP have shed 10.1% to churn near $8.25.


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