Eleventh-Hour Bears Jump On J C Penney Company Inc (JCP)

J C Penney Company Inc (JCP) has once again been rejected around the $10 mark

by Alex Eppstein

Published on Oct 23, 2015 at 2:52 PM
Updated on Jun 24, 2020 at 10:16 AM

For the third time since early September, J C Penney Company Inc's (NYSE:JCP) trek into double-digit territory has been short-lived. The stock popped to an intraday peak of $10.04 -- just shy of an annual high -- but quickly reversed lower, and was last seen down 8.5% at $9.14.

Put traders have reacted with gusto, as the contracts are being exchanged at triple the expected intraday clip. Eleventh-hour bettors are counting on JCP's losses to pile up, based on buy-to-open action at the weekly 10/23 9.50-strike put -- which ceases trading at tonight's close. Slightly longer-term speculators are buying to open the weekly 10/30 9.50-strike put, giving the stock an additional week to extend its slide.

This is fairly unusual, as far as recent options traders go. In fact, during the past two weeks across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 2.58 JCP calls have been bought to open for each put. The corresponding call/put volume ratio ranks in the 71st percentile of its annual range.

Fortunately, even if J C Penney Company Inc (NYSE:JCP) bounces back and the options settle out of the money at their respective expiration dates, the most the traders stand to lose is the initial premium paid. Based on the retail stock's Schaeffer's Volatility Index (SVI) of 49% -- which ranks in the low 18th annual percentile -- that sum is relatively inexpensive.

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