Put Traders Eye Trailing J C Penney Company Inc (JCP)

J C Penney Company Inc (NYSE:JCP) is one of the few retail stocks in the red today

by Josh Selway

Published on Jul 12, 2016 at 3:01 PM
Updated on Jun 24, 2020 at 10:16 AM

After a brief stint in positive territory, retail stock J C Penney Company Inc (NYSE:JCP) has now turned negative -- failing to capitalize on broad-market tailwinds. The stock was last seen down 1% at $8.59, even though most of its retail peers are trading sharply higher amid Amazon.com, Inc.'s (NASDAQ:AMZN) Prime Day. Meanwhile, in the options pits, traders have been switching sides recently, betting on JCP to move lower.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for instance, JCP has a 10-day put/call volume ratio of 1.26, which tops 81% of the past year's readings. In other words, put buying has been more popular than normal recently, compared to call buying.

Similarly, JCP's Schaeffer's put/call open interest ratio (SOIR) comes in at 1.35, revealing put open interest outweighs call open interest among options expiring within three months. Plus, the stock's SOIR ranks in the 64th annual percentile, meaning short-term speculators are slightly more put-heavy than usual.

Put volume is again accelerated in today's trading, with the options crossing at three times the normal pace. The most popular strike by far is the August 9 put, where more than 7,300 contracts have traded. However, it's unclear how options traders are positioning themselves here. Either way, it's a good time to buy premium on near-term JCP options, as the stock's Schaeffer's Volatility Index (SVI) of 56% sits in the bottom quartile of its annual range.

Beyond the options pits, analysts have mixed feelings on the stock. Ten brokerage firms call JCP a "hold" or "strong sell," though eight others deem it a "strong buy." Plus, the shares boast a consensus 12-month price target of $10.78 -- a 25.5% premium to current levels, 

Short interest, meanwhile, has been on the rise. Over the past three months, short interest on JCP has climbed by 24.4%. It would now take JCP short sellers more than seven sessions to cover their positions, going by average daily volumes.

Looking at the charts, J C Penney Company Inc (NYSE:JCP) earlier rally was quickly stopped short by its 200- and 320-day moving averages, which have each acted as resistance since the shares' bear gap in May. On the other hand, JCP has been knocking out a series of higher lows, and the stock seems to have found a home atop the $8.50 level.

Daily Chart of JCP July 12


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