J.C. Penney Options Traders Prep For An Unusually Wild Ride After Earnings Report

By Tomi Kilgore Markets MarketWatch Pulse

Traders of J.C. Penney Co. Inc. options are preparing for an unusually wild ride in the stock after the department store chain reports fiscal first-quarter results Friday morning. An options strategy known as a straddle, which is a pure volatility play that involves the simultaneous buying of bullish and bearish at-the-month options expiring after Friday's close, are pricing in a 13% one-day, post-earnings move in the stock in either direction after results are reported. That compares with the average post-earnings move of 9.1% the past 20 quarterly results, based on an analysis of FactSet data. The median move was 6.5%. It would be the sixth-biggest move, and the biggest since it tumbled 15.4% on Nov. 13, 2015 after third-quarter 2015 results were reported. The biggest move was a gain of 25.3% after Q4 2014 results were reported, while the smallest move was a 2.5% decline after Q2 2014 results. After day after the past 20 reports, the stock has gained nine times and declined 11. J.C. Penney's stock tumbled 8.2% in afternoon trade Thursday, pulled lower by disappointing results from fellow department store chain Macy's Inc. . Penney's stock has plummeted 37% year to date, while the SPDR S&P Retail ETF has slipped 2.2% and the S&P 500 has gained 6.9%.

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