Sold 300 contracts of the JCP 6-strikes for $20 apiece. Net proceeds after commissions of $5,785 on cash margin utilization of $24,600. If the stock holds above the margin-safe price of just $6.75 for the 27-week holding period, the nominal return will be 23.5% which is at the pace of 45.3% annualized.
I think that you folks will agree that this is truly an insane return given the fact that the stock is currently at $13.65 and the low on the stock the last dozen years has been $12.12.
09/16/2013 15:35:03 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
09/16/2013 15:36:20 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
09/16/2013 15:37:26 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
09/16/2013 15:38:35 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
09/16/2013 15:39:56 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
09/16/2013 15:41:08 Sold 50 JCP Mar 22 2014 6.0 Put @ 0.2 964.28
You finally made a bad call on these investments. Only reason JCP is still even open is because of that new stock they just issed, which is the single worst investment I've ever seen. Can't believe someone would buy that #$%$. It will be interesting to see if 'in the fullness of time', you manage to reverse losses here. I will be watching with interest.
I'm taking quite a beating at present with the portfolio down by 73K. However, in the fullness of time I'm going to come out just fine as if necessary, I'll be able to roll out the March 6-strikes to the August 5's when that series becomes available and if necessary I can then go to perhaps the Feb. 4's later on. Un less this stock is just a complete bottomless pit which I don't think is the case, I'll end up recovering all of my losses and I'll have some substantial profits to show for my efforts.
JCP has already thrown almost $2B into its turnaround efforts and when that much is spent, you know there will be results. Last holiday season under Ron Johnson, there were no discounts; no Black Friday door-buster sales, no promotions for Cyber Monday, etc. Results a year ago were disastrous. And you think that with the new merchandise, the stores within a store, the refurbishing of the stores, etc. won't have any effect at all? Good luck with that idea. As for bankruptcy right after the holidays, management just said that there would be $1.3B IN CASH as of 1/31/14 and that was BEFORE the raising of $800M from the stock offering. And in addition to the war chest of at least $2.1B as of 1/31/4, Penney can have substantially MORE cash than that if they decide to close down their worst-performing stores and sell the valuable underlying real estate.
In actual fact, the company has at least enough funds for TWO more holiday seasons after this one - in other words out to Jan. 2016. Now it's possible that despite all efforts, they still can't turn things around and bankruptcy wouldn't be a shock say 2.5 to 3 years from now. But it sure isn't about to happen anytime soon and there will be a lot of chances to turn things around. None of my options go out further than March.
By the way, even if the company isn't destined to get back to profitability, wouldn't you think that there would be all kinds of private equity capital wanting to take this thing private for $5?
I should have waited? How could I possibly know in advance that Goldman, the very party that loaned JCP $2.25B in May would come out with a scathing report on JCP's debt? For its part, business seems to be improving at the company. Management announced that they would be hiring 35,000 temporary workers for the holiday season - about what they hired TWO years ago in 2011 before Ron Johnsons reign.
There is NO liquidity crunch at Penney; the company will end the year at $1.3B in cash (before the equity offering) and they could if they wanted to raise a lot more by putting mortgages on some of their properties or else close 100 or 200 of their worst stores and sell the valuable real estate.
The Good Lord gave me a good brain and I figured out just why JCP sold shares when they said they didn't need the financing. I'm sure that after reading that awful oldman report, a major financier to JCP's suppliers such as CIT threatened to cut off financing unless the company raised more cash forthwith. So what was the company to do given such an ultimatum just before the critical holiday season. That just had to be the reason for that incredible turnaround; CIT is incredibly conservative and they actually did cut off supplier financing to Sears Holdings (SHLD) for four months in early 2012.
JCP is taking a terribly unfir hit to its credibility because they had to comply with CIT's ultimatum despite the fact that they have liquidity coming out of their ears and the turnaround effort is coming along nicely.
I'm leaving for my nine-day European trip (Como, Italy and the Provence area of France) on Saturday . I'll resume the updates when I return mid-month.