AAL

The Kroger Co (KR) Options Traders Bet On Short-Term Technical Trouble

The Kroger Co (NYSE:KR) stock is on the rise after the grocer raised its quarterly dividend

Jun 23, 2016 at 2:46 PM
facebook X logo linkedin


Grocery stock The Kroger Co (NYSE:KR) has gained 0.9% at $34.54, after the company increased its quarterly dividend -- saying it will continue to do so "over time" -- and approved a $500 million stock buyback plan at its annual shareholders meeting today. Looking back, it's been an uninspiring year for KR, with the shares down 17.4%, and recent rally attempts rejected by their 80-day moving average. Elsewhere, sentiment on KR is mixed across Wall Street, with analysts taking a glass-half-full approach, and traders both in and out of the options pits expressing skepticism toward the stock.

Diving deeper, seventeen brokerage firms track the stock, and 12 of them rate it a "buy" or better, with just two recommending to sell it. In fact, Hilliard Lyons boosted its rating on the shares to "buy" earlier. KR's average 12-month price target, meanwhile, comes in at $41.52 -- a more than 20% premium to current levels. 

Options traders, on the other hand, have shown distinctly bearish tendencies. For one, KR's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.84 -- in the 89th annual percentile. In other words, put buying has outpaced call buying at a highly unusual rate. 

Moreover, the stock's front-month gamma-weighted Schaeffer's put/call open interest ratio (SOIR) comes in at 2.47. This tells us that put open interest easily doubles call open interest among near-the-money options in the front-month July series.

Taking a closer look, the July 35 put is home to peak open interest of 16,384 contracts for all KR options, and data from the major options exchanges confirms substantial buy-to-open activity here. In other words, traders are hoping to see the stock fall further below the $35 level by July options expiration at the close on Friday, July 15. 

Now's not a bad time to speculate on KR with short-term options, either. This is according to the stock's Schaeffer's Volatility Index (SVI) of 25%, which ranks below three-fourths of the past year's worth of readings. Said simply, the options market is pricing in relatively low volatility expectations at the moment.

Meanwhile, The Kroger Co's (NYSE:KR) short-interest ratio comes in at a healthy 4.40, indicating almost a week's worth of buying power is on the sidelines, going by average trading volumes. However, it appears short sellers have already started to call it a day, with short interest on KR down almost 8% in the last reporting period. 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

 

Two High-Octane Trade Ideas. One Simple Goal: Intraday Profits.

Dynamite Day Trading Signals delivers two same-day options trades every week — powered by proprietary intraday analysis and 43+ years of trading expertise.

But this isn’t just another stream of alerts.

It’s a structured plan with clear entry and exit points – designed for traders who want to act fast, trade smart, and wrap up gains before the closing bell.

No guesswork. No overnight exposure – Just two well-researched setups per week — whether you prefer buying premium or selling it.

And the results speak for themselves: subscribers have locked in +245.8% total profit over the last six months (since inception!).

👉 Start your one-month trial now for just $10, and be ready for the next trade alert.