Strangles Purchased on J. C. Penney
Shares of J. C. Penney Company (JCP) are trading lower on the session by 1.03%, at $28.54. The stock has been ticking higher over the past two months after finding a bottom in mid-July. The stock is now testing the 200-day moving average.
With such a critical support/resistance level in battle, traders are betting that JCP will make a sharp move in the next few days. A short while ago, the September $30/28 strangle was purchased 2,416 times, on the offer, for $0.80. Ten minutes later, the trader came back and purchased another block of 3,962 strangles for a net debit of $0.87.
Total trade volume is now eclipsing open interest on both strikes, indicating that this is majority new positioning.
Near-term implied and historical volatility is diverging dramatically, at 51% and 28% respectively. Clearly, the options market is seeing the potential for a large move on the horizon; perhaps the company’s Q3 earnings on November 7th is the catalyst, but that would not account for today’s long strangle.
J. C. Penney Company, Inc., incorporated in 2002, is a holding company. The company is a retailer, operating 1,102 department stores in 49 states and Puerto Rico as of January 28, 2012.
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