JCP, URBN Options – Unusual Trading Activity – March 1, 2013
This week we’re taking a look at unusual options trading activity in two retailers – JC Penney (JCP) and Urban Outfitters (URBN).
As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
JC Penney Options (JCP)
An unusual amount of option activity was detected in JCP yesterday. Option traders exchanged 244,000 puts and 80,000 calls during the trading day. The large amount of puts indicates traders are bearish on the stock.
JCP is currently trading for $17.29 per share. The stock is down a whopping 57% from the 52-week high of $40.54, however, it’s still 10% above the 52-week low of $15.69.
The largest trade appeared to be a put ratio spread. 12,000 JCP May 2013 $16 puts were bought for $1.56, and at the same time, 24,000 May 2013 $12 puts were sold for 88 cents. The trader collected 20 cents on the 1X2 put ratio spread.
The traders will profit if JCP continues to move lower.
What’s behind the bearish action?
It’s no secret, CEO Ron Johnson has been trying to reinvent the old school retailer. But the turnaround hasn’t happened as quickly as many had hoped.
In fact, JCP just reported the biggest quarterly loss since 2004. At this point, the plan to fund their store makeovers with cash from operations is in jeopardy. It’s safe to say creditors and investors are getting nervous.
The bottom line is JCP isn’t profitable and there’s no indication of when they might be.
This trader should make a killing as JCP continues to sell off in the wake of another earnings disaster.
Urban Outfitters Options (URBN)
Our tracking system detected bullish options activity in URBN yesterday.
URBN is currently trading for $40.56. The shares are up 60% from the 52-week low of $25.43 and currently 8% below the 52-week high of $44.15.
Nearly 1,900 of the URBN March 2013 $41 calls traded hands for less than $1.35. The volume was 5X the open interest of just 386. The call buying is a clear indication of new bullish bets on URBN.
The traders stand to profit if URBN is above $42.35 when the options expire in a few weeks. In other words, URBN needs to rise 4.5% in order for the traders to see a profit.
Will URBN make the leap?
The success of this trade depends on how well the company performed last quarter. And they’ll announce those results on Monday, March 11th.
The consensus estimate is for URBN to earn 57 cents, but the whisper number that some investors are expecting is as high as 60 cents per share.
Obviously, if URBN can deliver EPS above these levels, it should fuel more upside. But if they fall short, we’ll likely see URBN pull back.
We’ll be keeping an eye on this one next week to see how it plays out…
More Options Ideas…
That wraps up this week’s unusual options trading and volume…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!
Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
