J. C. Penney Company, Inc. (JCP) Bulls Look For Post-Earnings Gains

J C Penney Company Inc (NYSE:JCP) reports earnings after the close today

by Josh Selway

Published on May 13, 2015 at 11:46 AM

Call volume has taken off on J C Penney Company Inc (NYSE:JCP) ahead of the company's first-quarter earnings release this evening. The contracts are crossing at seven times the expected intraday pace, and have have outdone puts by a 4-to-1 margin. Going by the data, it looks like traders are buying to open the weekly 5/22 9-strike call, hoping for JCP to surge above $9 by next Friday's close, when the options expire. 

As it stands now, the shares are 3.6% lower at $8.57. The stock could be hurting from sector peer Macy's, Inc.'s (NYSE:M) poor showing in the earnings confessional this morning, and also by retail sales figures that missed expectations. Whatever the case, delta on the call has dropped from 0.48 at yesterday's close to 0.38, meaning the option has about a 2-in-5 chance of expiring in the money. 

JCP had been seeing heavy call buying coming into today, too. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 7.56, and is only 2 percentage points from an annual high. This means over seven calls have been bought to open for each put, and marks a much stronger-than-usual appetite for calls.

Give the amount of short interest on J C Penney Company Inc (NYSE:JCP), though, some of this call buying could be a result of short sellers protecting themselves ahead of tonight's event. For instance, 32% of JCP's float is sold short and would take over two weeks to repurchase, at its average daily volumes. It hasn't been a good year for these bears: the shares have added over 32% in 2015.


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