Kraft Heinz Attracts Put Buyers on Plans to Restate Earnings

Kraft will restate more than two years' worth of financial statements

Managing Editor
May 6, 2019 at 10:59 AM
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Shares of Kraft Heinz Co (NASDAQ:KHC) were notably lower out of the gate, after the company announced it will be restating its financial reports from past quarters, due to "certain misstatements" and employee misconduct. Kraft also delayed its first-quarter earnings release. However, KHC shares have since turned higher, after Warren Buffett -- whose Berkshire Hathaway owns a Kraft stake -- said the company still has his confidence. 

KHC stock was last seen 0.4% higher at $32.69. The security has been relatively stagnant following its steep Feb. 22 bear gap, the result of a Securities and Exchange Commission (SEC) subpoena into its accounting policies. Kraft Heinz shares have remained below the $34 threshold since, and at last check were 24% lower year-to-date.

Digging into options, traders were optimistic ahead of today's bombshell. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows KHC with a 10-day call/put volume ratio of 4.52, ranking in the 96th annual percentile. In other terms, Kraft calls have been purchased over puts at a faster-than-usual clip during the past two weeks of trading.

Today, however, KHC puts are flying off the shelves at three times the average intraday pace, with nearly 7,000 contracts already exchanged. Most active is the weekly 5/10 31.50-strike put, with buyers expecting the shares to sink below the $31.50 level by the close on Friday, when the weekly options expire.

 

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