Shares of J. C. Penney (JCP) are moving lower this morning on the back of news that the company plans to open Disney (DIS) boutiques in 520 of it?s department stores. Traders are not impressed and are selling shares down 7.01%, trading at $27.05.
As you would expect, puts are active today. The heaviest action is coming in September, where the $29 put traded 8,600 times on open interest of only 7,681 contracts. Given that these contracts expire tomorrow, it is not surprising to see that the majority of them were sold; the largest block was 2,509 contracts sold on the bid, for $1.58.
Similar action can be found on the September $28 put, where over 7,000 contracts have traded on open interest of 12,930. What is interesting here is the activity we flagged yesterday about a long strangle play, where the trader purchased roughly 7,000 Sept $30/28 strangles for $0.80.
It appears that the trader is selling out of the puts here and leaving the calls to expire worthless. At current prices, the put can be sold for $1.18, translating into a 47.5% return in under 24 hours, or +$266,000.
Another interesting trade that hit the tape late yesterday was the purchase of the November $27/22 ratio put spread. This traded 25,000×50,000 for a net debit of $0.82. With shares breeching $27.00 today, the spread is now in the money. The trader is sitting on the position, currently.
Put volume is currently running at 2x normal volume with 45,124 contracts traded.
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.