Options traders have been targeting retail stocks GME and JCP in recent weeks
The 20 stocks listed in the table below have attracted the highest total options volume among mid-cap names during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are retail stocks
GameStop Corp. (NYSE:GME) and
J C Penney Company Inc (NYSE:JCP). Here's a closer look at how options traders are lining up on GME and JCP.
GME sold off on Friday after the company revealed
lackluster holiday sales -- the type of move options traders were betting on. Specifically, the stock's 10-day put/call volume ratio of 5.32 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks just 2 percentage points from a 12-month high. On a similar note, GME has a Schaeffer's put/call open interest ratio (SOIR) of 1.91. By itself, this SOIR shows put open interest roughly doubles call open interest among options expiring within three months, yet it also ranks in the top quartile of its annual range, signaling such a put-skew is uncommon.
On a closer look, the front-month January options series -- which expires this Friday -- dominated the action during the past two weeks. The biggest open interest jump occurred at the January 25 put, with the January 23 put close behind. However, while most of the 23-strike puts appear to have been bought to open, data from the major options exchanges shows mostly sell-to-open activity at the January 25 put, meaning these traders were actually betting on GME holding above $25 through this week.
In today's trading, GameStop Corp. (NYSE:GME) shares are paring some of Friday's losses, up 2.5% at $22.29, despite a round of price-target cuts. Specifically, Ascendiant Capital, Mizuho, and Wedbush all lowered their price targets on GME, though the latter reiterated an "outperform" rating, and said the
company could benefit from the debut of Nintendo Switch. Should GME continue to struggle, more analysts could abandon the bulls' camp. For instance, eight of 13 analysts recommend buying the shares, even though they're down 34% from their annual high of $33.72 from April.
Turning to
JCP, the stock is up 2.8% today at $6.95, on news the company is
opening Nike Inc (NYSE:NKE) shops inside more than 600 of its stores. Even with today's gains, though, the stock has dropped over 35% since its December high, and last week came dangerously close to new-low territory, also falling victim to
weak holiday sales.
At the ISE, CBOE, and PHLX, long JCP calls have edged out long puts during the past two weeks. During this time, the February 8 call saw the largest open interest increase, with data from the major exchanges confirming substantial buy-to-open activity at the strike. As such, options traders are betting on the stock taking back the formerly supportive $8 level before the contracts expire on Friday, Feb. 17.
As of Friday's close, J C Penney Company Inc (NYSE:JCP) shares sported a 14-day Relative Strength Index (RSI) of 22, meaning they've been badly oversold and may have been due for a bounce. The stock will have to fly in the face of skepticism, though; JCP short interest increased by almost 18% during the last reporting period alone, and now accounts for more than 24% of the stock's total available float.
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