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How trader is playing Kroger earnings

Kroger reports earnings Thursday morning, but one investor apparently thinks that it will be a non-event.

optionMONSTER's tracking systems detected the sale of 5,000 April 24 calls for $0.46 and 5,000 April 22 puts for $0.45, resulting in a total credit of $0.91. Volume was more than twice open interest in both strikes.

KR fell 0.04 percent to $22.89 in afternoon trading but has barely moved since the stock market bottomed in March 2009. The supermarket industry has been squeezed for years by competition from discount retailers such as Wal-Mart Stores and took a beating in the last recession. KR's last financial report on Dec. 2 missed forecasts, driving the shares lower by more than 10 percent in a week.

Today's option trade, known as a short strangle, is looking for a less dramatic move this week. It's designed to profit from shares remaining in a range and will let the investor keep the premium earned if they close between $22 and $24 on expiration.

The strategy also stands to benefit from a drop in implied volatility, something that frequently happens after earnings come out. (See our Education section)

Overall option volume in KR is 9 times greater than average so far today.

Disclosure: I am long WMT.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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