Feature article on the Fool with three opinions and nobody can manage the slightest disagreement? All three bearish?JCP is trading at 0.3 times sales. That's compares to peers ranging between 0.6 - 1.0 on that metric. So plenty of weakness is already priced. A pretty healthy risk of total failure is priced in, in my opinion.That valuation is based on pretty depressed sales, down about 35% over the last year. Put that together, and you have to assume that if JCP managed not even a successful turnaround, but just even to undo the damage it has done to its sales volume over the past year, you would have nearly a 50% increase in sales and probably a doubling in price/sales, which would leave you with a price of about $45 to $50 in a "success" scenario over the course of the next two years or so.JCP doesn't have much good going on at the moment (as you might suspect), but it does have pretty substantial improvement in merchandising. Clothing lines have seen vastly improved and modernized design focus, which alienated many consumers over the past year but seems to be earning the brand higher awareness and acceptance in younger demographics and online.Calls at an $18 strike price for January 2015 last traded at $4. Imagine that there were only two scenarios -- total failure or return to old sales figures. Total failure, you lose $4. Return to old sales figures, price may go to $45, you make $23. So the market is pricing the chance of a return to old sales figures over the next two years at a very low probability, about 15% prehaps.Of course that's an oversimplification, but it's also an indication of just how much terrible is already priced into current valuations. I like those calls as a way to limit your losses in this falling knife situation, because there is truely no guarantee that the underlying shares will be worth more than $0 in two years time.
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