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Monday, July 15, 2024

J.C. Penney Co. Options Active After Earnings Disappoint


Today’s tickers: JCP, OSUR & GS

JCP – J.C. Penney Co., Inc. – The department store operator’s shares had their worst percentage drop in more than two decades on Wednesday after the Company reported a loss for the first quarter, sales that fell more than expected and discontinued its quarterly dividend. The stock trades 17.3% lower this afternoon at $27.54. May expiry options changing hands on J.C. Penney this morning appear to be looking for a modest rebound off the lows by the end of the week. Call buyers snapped up more than 500 of the May $28 strike calls for an average premium of $1.00 each and purchased another 1,700 calls at the higher May $29 strike at an average premium of $0.49 apiece. The May $30 and $31 strike calls attracted buyers as well, with more than 3,000 and 1,600 contracts purchased at each, at premiums of $0.31 and $0.13 each, respectively. Meanwhile, strategists betting shares in JCP are at their lowest for the week sold May $27 and $28 strike put options, pocketing average premiums of $2.96 and $0.15 per contract on the trades. Put sellers walk away with the full amount of premium in hand as long as shares in J.C. Penney settle above $28.00 at expiration. Overall activity in JCP options is up sharply following earnings, with more than 138,000 lots in play versus the stock’s 90-day average options volume of 36,354 contracts.

OSUR – OraSure Technologies, Inc. – Shares in the medical equipment maker hoping to bring the first at-home HIV test to market jumped as much as 35.0% to a more than 5-year high of $12.28 today after a unanimous vote yesterday by an advisory panel was viewed favorably by investors. The FDA is expected to make a decision on the test in the next few months. Calls and puts are changing hands in roughly equal numbers this afternoon and overall volume is currently up above 2,200 contracts as of 1:05 p.m. in New York. Open interest in OraSure options is greatest in the May $10 strike call, with 1,551 open positions. Most of the calls were purchased for an average premium of $1.28 each exactly four weeks ago. While the value of the now in-the-money calls is much improved today, buyers have yet to break even on the positions given the current bid/ask price on the contract at $0.70/$0.95. Traders long the calls could choose to take delivery of the stock at expiration, however, to share in any up- or downside moves in the stock through the FDA’s decision.

GS – Goldman Sachs Group, Inc. – Shares in Goldman Sachs are back above $100.00 this morning after closing below that level on Monday and Tuesday, the stock’s first run-ins with double-digit prices since January. Sharp 38.0% gains in the stock in the first quarter of 2012 evaporated in April and the first couple of weeks in May. Some May $110 strike call buyers who may have been aiming to get in at the bottom of the recent selloff were burned quite severely in the 1.5 month slump, with the $110 strike contracts nearing expiration and premium on the far out-of-the-money calls now near zero. Open interest in the $110 strike calls suggests some portion of the 13,988 positions were purchased at the end of April for an average premium of $5.98 per contract. The continued bearish movement in the price of the underlying shares in May pulled down the probability $110 strike calls will land in-the-money at expiration, thus slashing the value of long positions. Call options purchased for $5.98 on average just a couple of weeks ago, are now printing a bid/ask of $0.01/$0.04 apiece. Hope springs eternal, however, and the purchase of a large block of 8,872 $110 strike calls for $0.07 apiece this morning is a far cheaper bet on near term upside, which may payoff if shares in Goldman can extend gains in the next two trading sessions. Another up-day tomorrow or Friday could lift premium on the options to provide an opportunity to sell the contracts at an advantageous price prior to expiration. The calls will of course expire worthless at expiration this week should shares fail to rally more than 9.75% to top $110.00. Shares in Goldman Sachs are currently off their highs of the session, trading up 0.35% on the day at $100.22 as of 12:15 p.m. in New York.


Caitlin Duffy

Equity Options Analyst

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