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Traders See Red Ahead for J.C. Penney Company, Inc. (JCP)

Put buyers circled J.C. Penney Company, Inc.'s August series of options

by 4/1/2014 10:03 AM
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Option Brief: August-dated puts were popular in J.C. Penney Company, Inc.'s (NYSE:JCP) options pits yesterday. While the August 3 put was most active -- with 8,334 contracts traded -- the largest transaction of the day occurred at the 7 strike.

Diving into the details, 5,864 contracts changed hands at JCP's August 7 put, with the majority trading as a single block of 5,000. Nearly all of the volume transpired at the ask price, suggesting the contracts were bought. What's more, open interest at the strike increased by more than 4,600 positions overnight -- the most of any strike -- and data from the International Securities Exchange (ISE) confirms the aforementioned lot was freshly initiated.

Monday's JCP out-of-the-money put buyers likely have one of two possible motives. Either they expect the shares -- currently 2% higher at $8.79 -- to plummet below $7 by August options expiration, or they may be shareholders bracing against a potential nosedive by picking up protective puts. No matter the strategy, the most the traders stand to lose is the initial premium paid, if J.C. Penney Company, Inc. (NYSE:JCP) is sitting at or above $7 at the close on Friday, Aug. 15, when the options expire.


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