To be sure, senior J.C. Penney bonds encompass less risk than buying stock. If the company goes out of business, bondholders can expect to receive some if not a considerable amount of their investment back. On the other hand, shareholders can expect next to nothing. However, shareholders are also positioned to receive the lion's share of reward if the company gets back on track.

It doesn't even need to get fully on track to profit. Halting the cash burn will pop the shares much higher, and J.C. Penney should have no problem turning around investor's negative perception on its future viability during the holiday season's sales. As someone who has spent years in retail, I know that the holiday season's sales can erase a lot of mistakes.

Keep in mind that the end of the year doesn't spell the end of strong sales. January is one of the best revenue and income producing months. In part, it's the timing of the earnings release along with expected guidance that I believe selling the January $8 put option makes such a strong investment thesis.

At a sales price of $1.05, total J.C. Penney exposure is reduced to $6.95. If the shares decline in value and the options are exercised, the cost basis begins at $6.95, but you can immediately write a call option against it, further reducing risk.

If the shares catch a bid and climb to $9.05 you make the same as if you bought the shares outright, albeit with much less risk. Over $9.05 and you forfeit any increase above that amount, but that's offset by the fact if the shares do nothing but sit at $8.35 until option expiration in January you make the full amount, just as if the stock increased in price.

For Real Money Pro investors that sold $8 put options a little more than a month ago, that's exactly what happened. The shares dipped in price, and are now about the same, resulting in a profit of the entire option premium provided J.C. Penney closes Friday above $8. Now is a fantastic time to rinse and repeat.

At the time of publication, the author was long JCP.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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