This Morning’s Bullish Trading
JC Penney (JCP) is bucking the bearish trend today. The stock is up 79 cents to $15.87 in heavy trading of 16.5 million shares, but no obvious headlines on the retailer to explain the relative strength. The stock is now up nearly 10 percent over the past two days following an analyst upgrade yesterday morning. Meanwhile, options on JCP are busy today as well. 40,000 calls and 63,000 puts so far. The largest trade is a 20,000-contract block of May 12 puts for 30 cents per contract. It might be a closing trade after the stock’s move higher over the past two days. Open interest at that strike is almost 40,000. April 14 puts and April 16 calls are the next most actives in JCP today.
Transocean Offshore (RIG) is up 9 cents to $49.97 and a Jan 60 ? 70 call spread is bought on the oil driller for $1.25 5000X. According to a source on the exchange-floor, an investor bought 5,000 Jan 60 calls on the stock for $1.65 and sold 5,000 Jan 70 calls at 40 cents each. It appears to be a new position, because volume exceeds open interest in both contracts. If so, the position has a bullish payoff graph that shows a max profit if RIG rallies to $70 or more through the January 2014 options expiration.
This Morning’s Bearish Trading
Delta Airlines (DAL) is down 70 cents to $14.04 amid broader weakness in the sector on reports of six deaths in China tied to a new outbreak of bird flu. The news triggered concerns about a possible slowdown in air travel and sparked a volatile reaction in Air France and KLM in European trading. Delta, UAL, and US Airways (LCC) are down on similar concerns. In options action, recent trades on Delta include an 8000-lot of September 18 call options at 47 cents per contract. An investor sold the calls, according to a source on the exchange floor, and appears to be closing out a leg of a Sep 18 ? 22 call spread that was bought on Delta on March 21. If so, they might be closing the position on diminishing hopes for a substantial rally in DAL through mid-September.
Equity Residential (EQR) is up 34 cents to $57.86 and options volume on the Chicago, IL Real Estate Investment Trust [REIT] is running 2.5X the daily average. More than 3,000 puts and only 185 calls traded on the ticker so far. The largest trade is a 1615-lot of Jul 52.5 puts for 65 cents per contract when the market was 55 to 70 cents. 2,501 traded against 5,320 in open interest. Some investors were possibly short the puts and are now covering the positions for fear the stock might fall.