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Making a Buck on JC Penney

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JC Penney shares surged on Friday, after investing titan George Soros disclosed a 7.91 percent stake in the company. Investors are reading this as an influential vote of confidence in the troubled company.

(Read More: JC Penney Jumps on News George Soros is Shareholder)

Early option trading was bullish, with traders shorting volatility in the name. After the first hour of trading, the biggest trade was the sale of 1,000 June 15-strike puts for $1.36 each. This is a bullish trade that will allow the trader to collect $1.36 in profit if the stock remains above $15 through June expiration.

If it doesn't, then this trader will buy the stock for an effective price of $13.64 per share. Soros is likely long the stock somewhere in the mid-$14 range, so getting exercised on this put would give the trader an average price that is lower than Soros'—and history has shown that trading on his coattails is a profitable strategy.

JC Penney will report earnings on May 17,and right now, the options markets are predicting a 7 percent move in the stock. Some of this is time premium, since earnings are still a few weeks away, but compared to JCP's historical median move of 4.4 percent, option prices may be on the expensive side right now.

As JCP burns through cash, it reduces the amount of time it has to make a comeback, which makes each earnings announcement more important than the last. Therefore, investor nervousness could remain high in this name, so you need to be tactical when it comes to selling options.

(Read More: JC Penney Offered Second Loan on Real Estate: Sources)

I would look at this trade as an opportunity to trade alongside Soros and Bill Ackman, and to either make a quick $1.36, or to buy the stock near its 52-week low for a longer-term turnaround trade.

(Read More: Was Ackman's Plan for JCP Too Big to Succeed?)

I have no positions, because I personally don't like the stock. However, seeing that people are selling puts makes me want to search around and see if I can pick up some high-yield corporate bonds on the name.

Brian Stutland is managing member of Stutland Equities and a contributor to CNBC's "Options Action."

Disclosures: None

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