Bernstein upgraded Kroger Co (NYSE:KR) to "outperform" from "market perform," and boosted its price target to $33 -- a more than 37% premium to last night's close. The brokerage firm said Wall Street is not pricing in "KR's capacity to survive the short term and positioning for the long term," and it considers the grocery chain "a serious omnichannel player." In reaction, KR stock is up 1.4% to trade at $24.40.

Options traders don't seem convinced Kroger shares can sustain this positive price action. With around 90 minutes left in today's session, roughly 38,000 puts are on the tape -- 11 times the expected intraday amount and four times the number of calls traded. Two-thirds of the day's put volume has centered at the July 26 strike, and all signs pointing to buy-to-open activity here.

According to Trade-Alert, this would mark the second straight day put buyers have targeted this out-of-the-money strike, with more than 13,900 contracts added here overnight. In this case, options bears expect Kroger stock to resume its longer-term downtrend over the next nine weeks -- a time frame that likely includes the company's first-quarter earnings report, tentatively slated for release in mid-June.

Kroger shares have a history of negative earnings reactions, including a 10% next-day drop back in March. This bear gap had the stock plummeting from the $29 level all the way down to the $24-$26 neighborhood, with the latter serving as a stiff ceiling for KR over the last two months. The equity tested this region earlier this month, before embarking on a six-day losing streak -- its longest since December -- that could be snapped today.

USA Technologies, Inc. (NASDAQ:USAT) stock is trading up 13% at $6.67, after hedge fund Hudson Executive Capital reported a 12% stake in the vending services provider, calling it an "attractive investment." In response, USAT options volume is soaring.

By the numbers, more than 1,600 calls have traded, well above the daily average, and puts are crossing at 13 times the average. New positions are opening at the July 7.50 put, most crossing near the bid price. Some traders seem to be well-positioned for today's rally, since 3,713 calls were bought to open during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), compared to just four puts.

Meanwhile, short interest has been rising, up 16% in the last two reporting periods, now standing at 9.34 million shares -- 19.2% of the float. Going by the average daily trading volume, this accounts for 12.7 days' worth of buying power. As such, some of the recent call buying may have been at the hands of shorts hedging against any upside risk.

USAT shares are now testing the $7 region from which they gapped lower back in February. The stock traded as low as $3.19 shortly afterward, after trading as high as $16.83 in 2018.

Verint Systems Inc. (NASDAQ:VRNT) stock is spiraling today -- down 8% at $56.25, pacing toward its worst day since Dec. 8, 2016, when it shed 10%. This follows a scathing report from Spruce Point Capital, which labeled the analytics stock with a "strong sell" opinion and said it sees 60%-70% downside for the shares.

In its report, the investment firm that focuses on short selling accused Verint Systems of "making up for slow growth with aggressive M&A and dubious accounting," and highlighted a "disregard for shareholders concerns." Spruce Point also expressed concern over VRNT's "atrocious governance," especially in regard to its proxy fight with Neuberger Berman, which has raised "significant red flags."

Heading into today's trading, VRNT stock was up more than 44% year-to-date, consolidating atop the round $60 mark in the wake of its April 15 three-year high of $63.94. This plunge has the shares on track for their lowest close since a late-March bull gap, and their first settlement south of the 80-day moving average since mid-January.

Options traders are bracing for even more downside for Verint Systems stock. At last check, roughly 1,350 VRNT puts were on the tape -- roughly 22 times what's typically seen at this point in the session, and 15 times the number of calls trading. Traders may be buying to open the June 50 put, expecting the equity to breach the round $50 mark over the next few weeks.

Skepticism has been growing outside of the options pits, too. Short interest on VRNT jumped 19% in the most recent reporting period to a record 3.63 million shares, or 5.7% of the stock's available float. A continued round of short selling could exacerbate headwinds on Verint Systems.

Subscribers to Schaeffer's Weekend Trader Alert newsletter just doubled their money with our Zscaler (ZS) August 60 call option recommendation. Below, we'll explain how this options trade hit its 100% target during a period of time where the tech stock rose just under 30% on the charts.   

When we initially recommended the call in an early March email to subscribers, Zscaler stock had risen almost 51% year-to-date, thanks to an impressive post-earnings bull gap. We also made a strong contrarian case for more upside for the stock, as sentiment data surrounding ZS did not seem properly aligned on this outperformer. 

Making this trade even more attractive was the Schaeffer’s Volatility Index (SVI) of 44%, a gauge of near-term volatility expectations that ranked in the bottom percentile of its annual range, telling us it could be a good time to buy premium.

Plus, short seller's tight grip began to loosen on the stock, with short interest dropping 7.3% in the last two reporting periods, likely providing some tailwinds on the charts, allowing subscribers to to achieve 100% profits on their ZS August 60 calls on Thursday, May 16 -- less than five weeks from our initial recommendation. 

Roku Inc (NASDAQ:ROKU) stock is flexing its technical muscle today, up 1% at $88.93, fresh off a record high of $89.79, even as the broader equities market sells off. This upside comes courtesy of a price-target hike to $110 from $92 at D.A. Davidson -- a 25% premium to last night's close -- which said the streaming name's addition of Activation Insights could "serve as a catalyst" for ad sales.

Most analysts are already bullish on Roku, with nine of 16 maintaining a "buy" or better rating." However, the average 12-month price target of $79.24 is a nearly 11% discount to current trading levels, meaning more price-target hikes could be on the horizon for a stock that's nearly tripled on a year-to-date basis.

Elsewhere on Wall Street, skepticism has been ramping up, with short interest surging 24.1% in the April 15-May 1 reporting period. Not only does the 9.43 million shares sold short account for 11.6% of the security's available float, but Roku's ability to rally 12.5% over this same time period speaks to its underlying strength.

Options traders, meanwhile, have targeted ROKU puts at an accelerated clip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.68 ranks in the 70th annual percentile. So while calls have outnumbered puts on an absolute basis, the elevated ratio indicates the rate of put buying relative to call buying has been quicker than usual.

In today's trading, nearly 42,000 calls and 30,000 puts have crossed so far, 1.2 times the expected intraday amount. The weekly 5/24 90-strike call is most active, with 5,600 contracts on the tape, and new positions being initiated. Those buying the calls expect ROKU stock to break out above $90 by tomorrow's close, while those selling the calls think $90 will serve as a short-term ceiling.

It's been a rough month for retail stocks, with dismal earnings reports from several high-profile names, including Lowe's (LOW) and Foot Locker (FL), driving the SPDR S&P Retail ETF (XRT) toward its third straight weekly close, down 2.3% since last Friday. One options trader today is positioning for more downside in the sector, and likely rolled their bearish bet down and out.

By the numbers, more than 48,000 XRT puts have changed hands today -- almost six times what's typically seen at this point, and 43 times the number of calls traded. According to Trade-Alert, the bulk of the volume occurred when one speculator closed out their June 40-44 put spreads, then bought to open the July 38-41 put spreads. If this is the case, the speculator expects XRT -- which was last seen trading at $41.66-- to fall all the way to $38 by July options expiration.

This bearish positioning is just more of the same for XRT options traders. Over the past 20 days, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.30 puts for each calls.

Echoing this put-heavy backdrop is the exchange-traded fund's (ETF) gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 4.95. This shows that near-the-money puts comfortably outweigh near-the-money calls among options expiring in three months or less.

 

African e-commerce issue Jumia Technologies (NYSE:JMIA) is seeing unusual options volume today, after short seller Citron Research once again weighed in on the firm. Just a few weeks after calling JMIA stock "worthless" and accusing the company of fraud, Citron today said it now has "indisputable evidence" of "manipulated financials and FAKE ORDERS." Against this backdrop, Jumia shares are down 1.8% at $22.98.

The "Amazon of Africa" priced its initial public offering (IPO) at $14.50 in April, the mid-point of its expected range. The stock debuted in the U.S. on April 12, opening at $18.95, and peaking at $49.77 five days later. More recently, though, JMIA shares touched a record low of $18.13 on May 10 -- the session after the first Citron note -- and have subsequently struggled beneath the $25-$27 area, which is also home to the equity's closing price of $25.46 on its first day of trading.

At last check, the security has seen more than 8,000 calls and 6,600 puts change hands already today. For context, the stock has averaged daily volume of fewer than 3,300 calls and 4,800 puts.

Digging deeper, it looks like some speculators are shrugging off Citron's latest note, buying to open the June 25 call, which is the most popular option so far. By purchasing the calls to open, the buyers expect JMIA shares to rebound north of $25 before the options expire on Friday, June 21.

On the flip side, it appears some bears may be buying to open the June 25 put. Vanilla put buyers here expect Jumia stock to sink beneath the $25 level before the front-month options expire in a little over a month.

Although call volume is outpacing put volume so far today, near-term open interest is put-skewed. In fact, JMIA's Schaeffer's put/call open interest ratio (SOIR) stands at 1.50, indicating that put open interest is roughly 50% higher than call open interest, looking at options that expire in the next three months. The June 20 put is home to peak open interest among all series, with more than 5,300 contracts in residence.

As we highlighted in our Midday Market Check newsletter, semiconductor stock Advanced Micro Devices, Inc. (NASDAQ:AMD) is surging today, last seen up 12.1% at $29.63, as investors react bullishly to the company's new line of Ryzen CPUs. Call volume is running in the 96th annual percentile thanks to heavy attention for the weekly 5/31 series, where data points to buy-to-open activity at all strikes 28 through 30. The 30-strike call is also popular in the weekly 6/7 series.

This puts AMD on pace for its highest close since early October. It's been seeing support from the 50-day moving average, and now sports a year-to-date lead north of 60%.

Also seeing unusual options trading is Uber Technologies Inc (NYSE:UBER), where the weekly 5/31 40-strike put is leading the way with almost 8,000 contracts traded. New positions have been opened near the ask price, indicating buy-to-open action is taking place. UBER stock has only closed below $40 twice since going public earlier this month, and this price point served as a floor back on May 23. The shares were last seen trading down 1.3%, at $40.97.

Finally, Zynga Inc (NASDAQ:ZNGA) options are hot after the company announced it would sell and lease back its San Francisco headquarters in a $600 million deal. There's heavy activity at the September 6 call, where it looks likely traders are closing out of positions now that ZNGA stock is trading at $6.18, up 2% on the day.

Sports retailer Dick’s Sporting Goods Inc (NYSE:DKS) has erased early gains, now down 4.1% at $34.30 in this morning's trading, despite the company reporting an impressive first-quarter earnings beat and upwardly revised full-year guidance. The reason behind the pullback remains unknown, as today marks the seventh quarter in a row Dick's has beat analyst estimates, per Reuters. CEO Edward Stack said the company has begun to "see the benefits of our key strategies and investments." 

On the charts, the security has already had a volatile year -- down 16.7% since its April 10 annual high of $41.19, but still sporting a 9.8% year-to-date gain. Support has emerged out at the 320-day moving average for most of the year, though the stock is trading below this trendline during today's pullback.

In response to today's post-earnings swing, Dick's Sporting Goods options are flying off the shelves. Specifically, DKS has already seen more than 15,000 calls and 10,000 puts traded in the first two hours of the session -- 16 times its average intraday volume. It looks like some speculators are betting on more upside for the shares this week, with the weekly 5/31 37-strike call appearing to attract notable attention from options buyers.

Meanwhile, short interest on the equity surged 34.9% during the past two reporting periods, and now accounts for 27.3% of DKS' total available float. At the stock's current pace of trading, it would take shorts just over seven days to buy back their bearish bets.

A close look at the technical setup for Archer Daniels Midland Co (NYSE:ADM) reveals a number of red flags. For starters, the stock is coming off a weak earnings performance just a few weeks ago, falling below the $40 level, which represents two times a major peak from 1997, as well as its 2018 closing low. Moreover, the shares have given up support at their year-to-date breakeven point, which could now act as resistance.

What’s surprising given this technical outlook is that the majority of covering brokerage firms have bullish ratings on the stock. By the numbers, five of eight analysts have “strong buy” recommendations, which leaves the door open for downgrades to come through and hit the shares with headwinds.

Another potential headwind could come from short sellers. Specifically, short interest has fallen in recent months, though there was a slight uptick in the last reporting period. Should these bears return in force and bring short interest back to 2018 levels, it’ll make it difficult for ADM to gain any momentum.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ADM commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

The stock market is taking a big hit this week, after several Chinese media outlets suggested Beijing could restrict the export of rare earth minerals, which are used in a variety of products, including smartphones and hybrids. Options traders are reacting to the latest salvo in the U.S.-China trade war by blasting the SPDR S&P Metals and Mining ETF (XME) and VanEck Vectors Rare Earth/Strategic Metals ETF (REMX), with both exchange-traded funds (ETFs) making notable moves on the charts.

Call Buying Popular as XME Pans New Lows

Precious metals mining fund XME was last seen trading down 0.8% at $25.06, earlier tagging a new two-year low of $24.80. Since topping out at a four-month high of $32.35 in late February, the shares have shed 22.5%, and are pacing toward their worst month since September 2015, down 13.2% so far.

This latest slide isn't concerning today's options traders, with 9,774 calls on the tape so far -- five times what's typically seen at this point, and eight times the number of puts traded. The July 27 call is most active, and it looks like new positions are possibly being purchased for a volume-weighted average price of $0.22. If this is the case, breakeven for the call buyers at July options expiration is $27.22 (strike plus premium paid).

More broadly speaking, the June 31 call is home to peak open interest of 17,725 contracts. Data from Trade-Alert indicates the bulk of these contracts were bought to open in mid-March, when XME was trading near $30. Regardless of where the fund settles at expiration, the most either set of call buyers stands to lose is the initial premium paid.

REMX Options Traders Set Short-Term Ceiling

Rare earth and strategic metals and minerals ETF REMX bottomed at $13.34 on May 13 -- its lowest mark since Jan. 2 -- but has since climbed 15% to trade at $15.35, up 3.4% in today's trading. What's more, the shares are on track to close north of their 120-day moving average for the first time since April 17.

Speculators are making a beeline toward REMX's typically quiet options pits, with 3,241 calls and 437 puts exchanged today -- three times the expected intraday amount. This accelerated options trading just echoes a recent trend, with total options volume topping out at an annual high on May 21, when 8,122 contracts were traded in a single session.

Today, traders may be liquidating their now in-the-money June 15 calls, while other speculators appear to be initiating new positions at the July 17 call. The bulk of these back-month calls have crossed at the bid price, suggesting they were sold. In this scenario, call writers expect the $17 level to serve as a short-term ceiling for REMX over the next seven weeks.

Ride-sharing service Uber Technologies Inc (NYSE:UBER) is set to unveil its first earnings report as a publicly traded company after tonight's close, and ahead of the event, the stock is relatively quiet -- last seen down 0.3% at $39.84. UBER's options pits, on the other hand, are buzzing, with volume running at a much quicker-than-usual clip.

By the numbers, around 35,000 calls and 22,000 puts have changed hands on UBER stock so far today, more than double what's typically seen at this point in the session. Most active is the weekly 5/31 40-strike call, which is potentially being bought to open for a volume-weighted average price (VWAP) of $1.40. If this is the case, breakeven for the call buyers at tomorrow's close -- when the weekly series expires -- is $41.40 (strike plus premium paid).

UBER options bears appear to be targeting the $40 level, too, with buy-to-open activity detected at the weekly 5/31 40-strike put. The VWAP on this at-the-money option was last seen at $1.38, which would make breakeven for the put buyers $38.62.

Finally, Trade-Alert highlights a potential short straddle using both the weekly 5/31 40-strike call and put. In this risky scenario, the speculator will be able to pocket the initial net credit as their full reward, should UBER settle right at $40 tomorrow night. More likely, though, they're hoping to profit on a post-earnings volatility crush.

Looking closer at the charts, Uber Technologies stock has had a soft start -- opening for trading at $42 on May 10, below the firm's initial public offering (IPO) price of $45 per share. This marks the highest the equity has ever traded, with UBER tagging its record low of $36.08 the very next day.