J. C. Penney Company, Inc. (JCP) Bulls Step Up

Nine of J C Penney Company Inc's (JCP) 10 most active contracts are calls

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Published on Feb 18, 2015 at 11:26 AM
Updated on Apr 20, 2015 at 5:32 PM

J C Penney Company Inc (NYSE:JCP) options are blowing up today, with the equity's 30-day at-the-money implied volatility 11% higher at 60.8%, showing increased demand for short-term options. Today's activity is painting a bullish picture, as calls are crossing at a pace 13 times what's normally seen at this point in the day. In fact, nine of JCP's 10 most active contracts are calls, eight of which expire this month.

The contract seeing the most activity is the February 8.50 call, where nearly 10,000 contracts have traded. Data shows that speculators are buying to open the contracts, meaning they expect JCP to topple $8.50 -- where the stock peaked earlier today -- by the close on Friday, when front-month options expire. Other options traders are buying to open the already in-the-money February 8 call, and want the equity to move north of the breakeven price of $8.37 (strike plus volume-weighted average price of $0.37) before the contracts expire on Friday.

Today's call buying echoes the theme in JCP's options pits from the past five weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security has a 50-day call/put volume ratio of 2.08 -- in the 86th annual percentile. However, with roughly a third of JCP's float sold short -- representing almost two weeks' worth of trading, at its average daily pace -- some of this call buying could be short sellers hedging their positions.

Those bearish traders may be questioning their bets, considering J C Penney Company Inc's (NYSE:JCP) success on the charts of late. Since touching a near-term low of $5.90 on Dec. 9, the shares have added 41%, and were last seen 2% higher at $8.30. What's more, the equity's ascending 10-day moving average has emerged as support in February.

Daily Chart of JCP Since December 2014 with 10-Day Moving Average

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