Kroger Options Traders Bet on a Post-Earnings Volatility Crush

Kroger's fourth-quarter earnings and current-quarter forecast fell short

Mar 7, 2019 at 9:47 AM
facebook twitter linkedin


The shares of Kroger Co (NYSE:KR) are spiraling, after the grocery chain reported fourth-quarter adjusted earnings of 48 cents per share on $28.09 billion in revenue -- below consensus estimates. The company also said full-year per-share earnings will arrive between $2.15 and $2.25, less than analysts are expecting, citing increased expenses related to in-store technology and delivery services as competition from Amazon (AMZN) and Walmart (WMT) ramps up.

It's been a choppy stretch for Kroger shares, though all pullbacks -- including an Amazon-related drop late last week -- have been contained by the stock's 320-day moving average. However, with KR stock down 13% to trade at an eight-month low of $24.85, this trendline is at risk of being breached on a closing basis for just the second time since last June.

Short-term Kroger options traders were more call-heavy than usual ahead of earnings, per the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.97, which ranks in the low 13th annual percentile. However, a deeper dive reveals not all KR call traders are bullish.

Specifically, the weekly 3/8 29-strike call is home to one of KR's top open interest positions, with roughly 4,000 contracts outstanding, and data from the major options exchanges points to notable sell-to-open activity here. In other words, call sellers were betting on Kroger stock to stay below $29 through expiration at tomorrow's close -- or anticipating a post-earnings volatility crush.

 

Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!