Options Check-Up: J C Penney Company, Macy's, and Target Corporation

Analyzing recent option activity on JCP, M, and TGT

by Griffin Kruse

Published on Dec 29, 2014 at 8:13 AM
Updated on Apr 20, 2015 at 5:32 PM

Among the stocks attracting attention from options traders lately are retail giants J C Penney Company Inc (NYSE:JCP), Macy's, Inc (NYSE:M), and Target Corporation (NYSE:TGT). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on JCP, M, and TGT.

  • JCP has had a putrid year, shedding nearly 29% of its value year-to-date to settle at $6.50. In opposition to this downward trend, sentiment in the stock's options pits is bullish. J C Penney Company Inc's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 1.88 stands higher than 72% of all similar readings taken in the past year. Relatively speaking, the stock's short-term options are also fairly cheap at the moment, as its Schaeffer's Volatility Index (SVI) of 55% ranks in the 27th percentile of all similar readings over the past year. Short sellers have also taken an interest in JCP; short interest accounts for almost 36% of the stock's float, which would take these bearish traders about six sessions to cover their bets, at average daily trading volumes. Against this backdrop, the recent affinity for long calls could be attributable to short sellers looking for an options hedge.

  • Shares of M have advanced in 2014, adding 19.95% year-to-date, despite a 0.33% loss Friday to perch at $64.05. The equity notched a fresh all-time high of $65.74 on Friday, Nov. 28 (Black Friday), and recently bounced off its 10-week moving average. Despite this positive yearly growth, option buyers have been picking up puts over calls at a higher rate than usual -- Macy's, Inc's 50-day ISE/CBOE/PHLX put/call volume ratio of 1.31 ranks in the 90th percentile of its annual range. However, an unwinding of pessimism in the stock's options pits could send the shares even higher. The security's short-term options are slightly less expensive than usual, as its SVI of 26% ranks in the 37th percentile of all similar readings taken in 2014.

  • TGT has also notched generous gains this year, increasing 18.6% in value year-to-date to sit at $75.06, while outperforming the S&P 500 Index by over 16 percentage points in the last two months. In fact, TGT on Friday scored a new record high of $75.37. Surprisingly, sentiment in the stock's options pits is bearish. Target Corporation's 10-day ISE/CBOE/PHLX put/call volume ratio of 1.03 stands higher than 72% of all of all similar readings taken in the past year. Additionally, 70% of analysts covering the equity rate it a "hold" or worse, indicating that a fresh batch of upgrades could send shares of TGT to even loftier levels. The stock's short-term options are neither expensive nor cheap, as its SVI of 21% reads at the 51st percentile of all similar readings over the past year. However, TGT's Schaeffer's Volatility Scorecard (SVS) of 91 indicates the shares have made aggressively large swings over the past year, relative to what the options market has priced in.




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