Kroger Stock Takes Out Key Level On Potential Alibaba Collaboration

KR stock is on track for its best day since November

Managing Editor
Jan 25, 2018 at 9:47 AM
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For the second time in as many weeks, Kroger Co (NYSE:KR) is caught up in e-commerce buzz. Specifically, reports have surfaced that the grocer conducted early-stage business talks with Chinese e-commerce giant Alibaba (BABA). It is unclear whether the reported talks will amount to an actual partnership, but they could represent a continued effort to counter (AMZN) and its foray into the grocery industry after its purchase of Whole Foods last year.

The news has Kroger stock up 1.9% to trade at $30.06 this morning, trading above the $30 level for the first time since a mid-June bear gap. Since falling to a three-year low of $19.69 on Oct. 2, KR stock has added back 56%, guided higher by its rising 30-day moving average. 

In the options pits, the equity's Schaeffer's put/call open interest ratio (SOIR) sits at 1.99. Not only does this indicate put open interest doubles call open interest among contracts expiring within three months, but the ratio ranks in the 97th percentile of its annual range, pointing to a much bigger-than-usual put bias among near-term traders. An unwinding of this apparent skepticism could add fuel to KR's fire.

The good news for options traders is that Kroger stock has a Schaeffer's Volatility Index (SVI) of 28%, and that is just 14 percentage points from a 12-month low. This hints at low volatility expectations being priced into near-term options contracts.


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