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Weekly Call Options Eye Rally In J.C. Penney Ahead Of New Year


Today’s tickers: JCP, RPTP & WTR

JCP – J.C. Penney Co., Inc. – Upside call buying in weekly options on J.C. Penney this morning suggest some traders are positioning for shares in the department store operator to rally during the final week of the year. Shares in JCP are up 2.65% at $20.11 as of 11:05 a.m. in New York, but are down more than 40% since the start of 2012. Fresh interest in weekly calls looks for shares in the retailer to extend this morning’s gains when the market reopens after the Christmas holiday. Volume is heaviest at the Dec. 28 ’12 $20 strike, where upwards of 3,500 calls changed hands against open interest of 1,469 contracts. It looks like most of the volume was purchased for an average premium of $0.68 each in the early going. In-the-money call buyers stand ready to profit at expiration this week should shares in JCP rally another 2.8% to top the average breakeven price of $20.68. Bullish positioning spread to the Dec. 28 ’12 $20.5 and $21 strikes, with more than 650 contracts purchased at each strike for average premiums of $0.45 and $0.28 apiece, respectively. Finally, around 275 of the Dec. 28 ’12 $22 strike calls were picked up at an average premium of $0.20 each, thus positioning buyers to profit in the event of a more than 10% move in the share price to $22.20 by expiration.

RPTP – Raptor Pharmaceutical Corp. – Shares in Raptor Pharmaceutical Corp. fell sharply in after-hours trading on Friday after the company said the U.S. Food and Drug Administration needs more time to complete its review of Raptor’s New Drug Application (NDA) for RP103 (PROCYSBI™), a potential treatment for nephropathic cystinosis, according to a press release issued by Raptor on Friday. Shares continue to slide on Monday morning, down 7% at $5.34 as of 11:25 a.m. ET. One or more traders preparing for Raptor’s shares to continue to slide in the New Year snapped up put options in the February expiry. Traders exchanged more than 750 puts at the Feb. $5.0 strike against previously existing open interest of 271 contracts. It looks like most of the downside puts were purchased for an average premium of $0.19 apiece. Put buyers stand ready to profit in the event that Raptor’s shares decline another 10% from the current price of $5.34 to breach the average breakeven point at $4.81 by February expiration. Shares in Raptor Pharmaceutical last traded below $4.81 at the end of November.

WTR – Aqua America, Inc. – The provider of water or wastewater services popped up on our scanners this morning due to heavier-than-usual trading traffic in upside call options on the stock. Shares in Aqua America, Inc. are up 0.40% this morning at $24.95 as of 11:30 a.m. ET, but earlier climbed 1.0% to hit $25.10. One or more traders appear to be positioning for shares in Aqua America to rally during the first three months of 2013, snapping up more than 1,200 calls at the Mar. $25 strike at a premium of $0.80 apiece. Call buyers stand ready to profit at March expiration should WTR shares increase another 3.4% to surpass the breakeven price of $25.80. Aqua America’s shares are up nearly 15% since the start of 2012. The company reports fourth-quarter earnings on February 27th, a couple of weeks before March options expire.


Caitlin Duffy
Equity Options Analyst

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