Put Spread on JCP on 1/11/2013

J. C. Penney Company (JCP) operates department stores in the United States and Puerto Rico. The company sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings. The embattled retailer last year hired Ron Johnson (the man in charge of Apple Stores) as its new CEO. 

Mr. Johnson has brought the concept of Apple Stores to JC Penneys and has failed misreably in its restructuring attempts. He plans to have iPads at the retailer so customer can self check out their purchases. He plans to replace most associates at the store with computers.  One thing that Mr. Johnson has failed to realize is that folks go to Apple Stores already knowing what they want to buy. They go to JCP to see what is out there and that is where "impulsive buying" comes in. As such, JC Penney's sales have suffered. If John Cash Penney was around today, he would have fired Mr. Johnson himself!

Shares have formed a "double top" and are heading lower. Today's stock downgrade have pushed shares lower. A possible support is around the $16 level. 

52-Week Trading Range: $15.69 - $43.18

Last Trade: $18.05

Here is the trade:

Buy One Feb $18 Put option at $1.35

Sell One Feb $16 Put option at $0.55

Net Investment $0.80

Maximum Profit $1.20 if stock closes at $16 by expiration day. ($2.00-$0.80)

Maximum loss $0.80 if stock closes above $18 by expiration date.

Trade Buy 1 February $18.00 Put at $1.35 Sell 1 February $16.00 Put at $0.55 For a net debit of $0.80 Profit/Loss Analysis Breakeven at $17.20 Maximum profit is $120.00 at strike of $16.00 Maximum loss is ($80.00) at strike of $18.00 Closing Summary Sold 1 February $18.00 Put at $0.00 Bought 1 February $16.00 Put at $0.00

Position closed on 2/15/2013 at price of $0.00 with a -100.00% loss in 34 days.

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