How Kroger Options Traders Nearly Tripled Their Money

KR call traders bagged a 181% profit in less than one month

Digital Content Manager
Mar 8, 2022 at 3:46 PM
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Subscribers to our Schaeffer's Weekend Trader services scored a 181% profit with our Kroger Co (NYSE:KRApril 14, 2022, 44-strike call recommendation in less than one month. Let's explore our reasoning for initiating a long position on the grocery retailer (and Cincinnati staple!), and dive into how KR has performed since then. 

When we made our recommendation on Sunday, Feb. 13, the equity had not long before received a downgrade from Citigroup on Jan. 28, and formed a doji pattern. The security then climbed up the charts, though short-term options traders remained put-biased, with its Schaeffer’s put/call open interest ratio (SOIR) of 1.52 standing higher than 90% of readings from the past year. 

The brokerage bunch was leaning bearish, too. At that point in time, just two of the 16 analysts in coverage called KR a “strong buy,” compared to 10 “hold” ratings, and four “strong sell” ratings.

Later in February, founder and CEO Bernie Schaeffer noted Kroger stock had technical and historical qualities going for it. More specifically, the security had pulled back to its 80-day moving average, a trendline that had assisted KR in the past.

In fact, Kroger stock had seen positive, one-month returns almost 70% of the time in at least six instances over three years, averaging a 3.4% pop. A similar move would have placed the stock within chip-shot of its January record peak.

This trendline later proved to be spot-on. At the time of our recommendation, Kroger stock closed at $46.27. The shares scored a post-earnings pop of 11.6% back on March 3, bouncing off their aforementioned 80-day moving average and getting an additional boost from analysts rushing to adjust their price targets on the underloved grocery name.

On that day, KR gapped higher at the open and continued to ascend. Trader procedure in these situations is to take the volume-weighted average price (VWAP) for one hour after target has been hit. They used 9.68 as the exit price on this option (181% gain), with the closing price for KR of $55.00. So in less than a month, subscribers were able to lock in a 181% profit on Kroger's big breakout. 

KR 80 Day 

 

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