Options Trade - J.C.Penney (JCP)
Wednesday August 08, 2012

Earnings Surprises Can Work Well For The Prepared!

**OPTION TRADE: Buy the JCP Nov 2012 25.000 call at or under $1.50, good for the day. Place a protective stop limit at $0.50 and a pre-determined sell at $4.50.

by Ian Harvey

August 08, 2012

Introduction

Be warned that this trade is quite risky and is not for the faint-hearted – however if the company manages a turnaround then expect the stock to jump 20% or more after the report on Friday, August 10, 2012.

The street expects EPS and revenue of ($0.22) loss and $3.22B, respectively.

Using option contracts, you can maximize your opportunity for fast profits. During the first day of trading after news is released, these contracts can double in value or more.

Discount department store J.C. Penney (NYSE: JCP) is in the middle of a turn around. That coincides with the stock bottoming in value as investors have abandoned the company. The naysayers may be surprised. JC Penney is working through its issues. This quarter may be the first sign of more good things to come.

If so, the stock could jump some 20% or more after the report. Call options here will easily double, or triple, if that is the case.

The Facts

It’s officially “go” time now at JCP, and the company has a lot of catching up to do in not so much time – particularly after the last three quarters losses!

Analysts see J.C. Penny profits doubling from the current fiscal year ending January 31, 2013 to the next. That is huge growth. All that is needed for this one to really jump is a spark.

The stock has a market capitalization of $4.64B and is currently trading at $21.21 with a 52 week range of $19.06 - $43.18. The stock's year-to-date performance has been -38.96%. It is currently trading above 20 SMA, but below 50 and 200 SMA.

The Turnaround

JCP is finally going to open up its newly designed and refurbished stores for public consumption sometime in August.

Penney will feature 10 individual shops within each store featuring brand names like Liz Claiborne, Izod, Levi’s and Haggar to their new “jcp” private-label brand of apparel.

The shops are modular units that link to form walls and floor space for display, and Penney’s is looking for 700 stores to get the initial 10-shop model, with a goal of all of its stores to eventually have a multi-shop model in place by 2014.

The goal clearly is to drive consumers to the stores for “branded” name merchandise, rather than the traditional JCP shoppers’ reasons of “bargains” and cheaper prices. That is as dead as the Model T.

Therefore, based on the facts above the following options trade is recommended…..

**OPTION TRADE: Buy the JCP Nov 2012 25.000 call at or under $1.50, good for the day. Place a protective stop limit at $0.50 and a pre-determined sell at $4.50.


”Success is simple. Do what's right, the right way, at the right time.”


Option Tip for your Success!
Options traders are not successful because they win.
Options traders win because they are successful.



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