Options Traders Win Big on Kroger Stock's November Surge

KR stock had recently based near the round $20 level

Dec 7, 2017 at 11:44 AM
facebook twitter linkedin


Subscribers to Schaeffer's Weekend Trader Series service recently banked a quick 104% profit on our Kroger Co (NYSE:KR) April 20, 2018 21-strike call recommendation. Here's a closer look at why we became bullish on KR stock, and how the options trade we recommended on Sunday, Nov. 19, unfolded.

There is no denying that Kroger has had a tough year on the charts, with a number of grocery stocks taking a big hit after Amazon (AMZN) bought out Whole Foods (WFM). However, that fundamental challenge had been thoroughly priced into the shares by mid-November, and the stock was starting to show signs of life.

What's more, KR shares formed a base around the round $20 level in late September and early October, which corresponds with the stock's December 2015 record high of $42.75. Kroger stock had been moving higher in the subsequent weeks, and was trading above support at its 20- and 50-day moving averages -- which had previously formed a bullish cross.

However, there was plenty of skepticism levied toward the stock -- which could translate into buying power once it started to unwind. For starters, the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.20 ranked in the 86th annual percentile, pointing to a heavier-than-usual put-skew among near-term traders.

Plus, nine of 12 analysts maintained a lackluster "hold" recommendation, while the stock's short interest-to-float ratio stood at a lofty 5.5. A round of upgrades and/or a short-covering rally could certainly create tailwinds for the shares.

In order for our recommended calls to reach their target profit, Kroger shares needed to rally more than 18%, based on the option's leverage ratio. While the equity edged higher during the low-volume Thanksgiving week, a strong third-quarter earnings report on Nov. 30 sent the KR gapping higher -- allowing us to close our position that day, when the stock was panning levels not seen since mid-June.

kr stock daily chart

 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 

 


 


 
Special Offers from Schaeffer's Trading Partners