The big four-way spread surfaced midday yesterday when an investor did the following: sold 14,200 April 17 calls on JCP at $0.14, bought 14,200 April 12 puts for $0.09, bought 14,200 May 17 calls for $0.60 and sold 14,200 May 11 puts at $0.25. In other words, they sold the April 12-17 bearish risk-reversal at a nickel and bought the May 11 - 17 bullish risk-reversal for $0.35, paying $0.30 for the package, 14,200X.
Looking at trade history and open interest of the Apr and May options on JCP, yesterday's spread trading appears to roll a bullish position out from April to May.
The April combo was probably bought to open for $0.28 on March 5. The stock is down a bit (about $0.20) since that time. Now, with 18 days left until the expiration, the bullish risk-reversal is being rolled to a similar position in the May options.
Interestingly, JCP was the subject of unsubstantiated market chatter yesterday. According to Briefing, there was talk the company could announce management changes. Chatter about a change at the CEO level has been around before and it's not clear there's any substance to any of it. In addition, short interest in JCP is currently very high at 40% and speculation can cause a lot of volatility in the stock. In any event, the bullish risk-reversal in May seems to reflect expectations that something positive is in the works, or the combo might have been initiated by a short-seller to help hedge a short stock position. Either way, the positioning seems to reflect the view that JCP might turn the corner and trade higher through the May options expiration.
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