Options Radar: Aeropostale, J C Penney, and Valeant Pharmaceuticals

Reviewing notable options activity on Aeropostale Inc, J C Penney Company Inc, and Valeant Pharmaceuticals Intl Inc

Digital Content Group

Nov 12, 2014 at 11:50 AM

Three stocks seeing notable options activity today are retailers Aeropostale Inc (NYSE:ARO) and J C Penney Company Inc (NYSE:JCP), as well as drugmaker Valeant Pharmaceuticals Intl Inc (NYSE:VRX). Here's a look at how today's options traders have been placing their bets on these three names.

Aeropostale Inc (NYSE:ARO) touched a 12-year low of $2.68 earlier, and at last check, was 0.8% below breakeven at $2.75. Year-to-date, the shares have lost a mind-numbing 70% of their value. Meanwhile, in ARO's options pits, puts are crossing the tape at 10 times the expected intraday rate. Plus, the stock's 30-day at-the-money implied volatility has surged 9.7% to 74.4%, signaling elevated demand for short-term strikes. Most active so far is ARO's December 2.50 put, as buyers -- according to Trade-Alert -- place fresh downside bets ahead of the retailer's upcoming turn in the earnings confessional, after the close on Wednesday, Dec. 3.

Speaking of earnings, J C Penney Company Inc (NYSE:JCP) will step up to the plate tonight, and the Street is calling for a third-quarter per-share loss of 80 cents. Ahead of this event, the stock is up 5.6% to trade at $7.60, but remains nearly 17% lower in 2014. In options land, calls are trading at close to triple what's expected at this point in the session -- with the most attention being paid to JCP's weekly 11/14 9 strike. These positions are seeing what looks to be buy-to-open activity, as bullish traders anticipate -- or short sellers hedge against -- a post-earnings rally past $9 by week's end, when the series expires. Looking back, the shares haven't explored territory north of the strike since early October.

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) has barely moved today, up 0.3% at $130.41, even though takeover target Allergan, Inc. (NYSE:AGN) is being courted by rival Actavis plc (NYSE:ACT). Nevertheless, VRX calls are flying off the shelves at eight times the usual intraday clip, and quadruple the pace of puts. The pharmaceutical firm's most active strike is the December 135 call, where 6,250 contracts are on the tape. Traders are largely buying to open these positions, expecting VRX to topple $135 by the close on Friday, Dec. 19, when the back-month options expire.

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