KR Analysis

Kroger Co. (KR)

Update 6/19/2017: KR fell sharply after earnings were published, with two large opening gaps in a row, the first the day before announced its purchase of Whole Foods Market and the second day after the announcement. As the grocery sector staggered with shock,  rather than prolong the pain in the face of small odds against a return to profitability, I exited weeks before expiration.

Shares declined by 25.3% over five days, or a -1,848 annual rate. The options position produced a 50.8% loss on debit for a -3,705% annual rate.

KR publishes earnings on Thursday before the opening bell.

I shall use options that trade for the last time 37 days hence, on June 23.

Implied volatility stands at 32%, which is triple the VIX, a measure of the volatility of the S&P 500 index.

KR’s IV stands in the peak of its annual range and the 71st percentile of its most recent broad movement.

The price used for analysis was $30.19.

Premium: $1.97 Expire OTM  
KR-iron fly Strike Odds Delta
Long 34.00 90.4% 11
Break-even 31.97
Short 30.00 49.1% 55
Short 30.00 51.2% 45
Break-even 27.97
Long 26.00 91.6% 7

The premium is 49% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered an order on KR as described above. The stock at the time of entry was priced at $30.24.

By Tim Bovee, Portland, Oregon, June 14, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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