JC Penney Short Sellers Hedge Bets Ahead Of Earnings
Schaeffer's Investment Research | Aug 16, 2018 12:42AM ET
Retail giant JC Penney Company Inc Holding (NYSE:JCP) is lining up to the earnings confessional this week, set to report its second-quarter results before the market opens, tomorrow, Aug. 16. Below, we will take a look into J C Penney's long-term performance on the charts, as well as to what the options market is pricing in for the stock's post-earnings moves.
Last seen down 8%, at $2.43, JCP is significantly lower alongside other big name retailers , after sector peer Macy's (NYSE:M) reported a disappointing gross margin outlook. Longer term J C Penney stock has not fared much better, with the shares stuck in a series of lower highs since late February. Any breakout attempts have been quickly capped by the 80-day moving average, pushing JCP to its 23% year-to-date deficit.
Looking at its earnings history, JCP has closed lower the day after the company reported in five of the last eight quarters, including the two most recent, and a 16.6% drop this time last year. Looking back eight quarters, the shares have moved 9.9% the day after earnings, on average, regardless of direction. This time around, however, the options market is pricing in an enormous 25% move for Thursday's trading.
In the options pits, traders have been leaning bullish during the past two weeks. This is per the stock's 10-day call/put volume ratio of 2.74 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Plus, this ratio ranks in the 80th percentile of its annual range, suggesting calls have been purchased over puts at a faster-than-usual clip.
That could be due to the stock's high short interest levels. Specifically, almost half of JCP's float is sold short, so it's likely some short sellers have bought calls as a hedge against a sharp upside move in the shares.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.