Stocks quoted in this article:
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past five trading days. The companies highlighted are those that are new to the list since the last time the study was run. 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), Microsoft Corporation (NASDAQ:MSFT), and Micron Technology, Inc. (NASDAQ:MU).
MSFT's 35-strike is still in focus, but today it's in the back-month series. Nearly 2,700 November 35 calls have traded so far, the majority of which have done so on the ask side. Elsewhere, option traders are calling a short-term top on MU by selling-to-open the weekly 9/27 17.50-strike puts. Elsewhere, here is a quick look at the interesting activity in JCP's options pits.
J.C. Penney Company is having a terrible day. At last check, the stock was down more than 13% to trade at $10.29. Earlier in the session, the equity fell to the $9.93 mark -- its lowest level since December 2000. Against this backdrop, options volume has spiked to nearly eight times the average intraday pace. As such, the equity's 30-day, at-the-money implied volatility (IV) has surged 30.1 percentage points, or 49.6%, to 90.9%. For the sake of comparison, this reading stood at 51.8% on Sept. 11. Given that JCP's price action is to the south -- and that short selling has been restricted -- puts are easily winning the numbers game, outpacing calls by a margin of more than 2-to-1.
The most sought-after position thus far is the January 2015 5-strike put, which has seen 28,219 contracts change hands. The lion's share of the volume came from one large lot of 26,000 puts, which crossed the tape at the ask price of $1.00. With IV up 10 percentage points on this block trade, and volume outstripping open interest, it seems safe to assume that new bearish positions were initiated. Data from Trade-Alert confirms this theory. Based on the initial entry price for the LEAPS, the speculator expects JCP to fall beyond $4 (strike less premium paid) over the next 15-plus months, or more than 61% from its current perch. Drilling deeper, this transaction was evidently tied to a stock purchase. Given the puts' deep out-of-the-money status, the buyer could be a shareholder picking up some options-related insurance, or someone hoping to buy JCP shares on the dip (but protect his investment, should the equity collapse further).
Today's slide comes amid a headline-stealing week for J.C. Penney Company, Inc. (NYSE:JCP), and by the looks of its price action, not many of those headlines have been upbeat. Last Friday, specifically, Bloomberg reported that the strained retailer was on the hunt to raise more cash. Goldman Sachs followed up on these liquidity concerns yesterday by slapping JCP's unsecured debt with an "underperform" rating. This afternoon, meanwhile, Maxim slashed its price target on the security to $22 from $27. Considering this new price target -- as well as the consensus 12-month price target of $15.57 -- is still a lofty premium to present trading levels, additional rounds of cuts may be on the horizon, which could spell contrarian-related trouble for JCP.