Posted: Friday, June 27, 2014 8:00 AM ET
After Thursday’s trading in J. C. Penney Company Inc. (JCP) MarketIntelligenceCenter.com's patented algorithms uncovered a trade that offers a 12.20% return or 18.71% on an annualized basis (for comparison purposes only), while providing 18.42% downside protection.
The trade is a Feb. '15 covered call at the $8.00 level for a net debit of about $7.13. The net debit is also the breakeven point for this trade.
For a higher return, consider buying a longer-term call option, like the Jan. '15 at the $7.00 level. By buying the call for $2.26 instead of paying about $8.74 for the stock, the assigned return rate for this alternate trade is 53.85%, but the stock has to finish above $7.65 when the sold call expires for this trade to be profitable.
Standard & Poor’s has a 3 STARS (out of 5) hold ranking on JC Penney. Technical indicators for the stock have been bullish and support and resistance have been in the area of $8.39 and $8.93, respectively.
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