Tuesday, March 1, 2011

Kroger (KR) - Earnings Vol Sale

KR is trading $22.87, down small with IV30™ up 4.0%. The LIVEVOL® Pro Summary is below.


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The Kroger Co. (Kroger) is a retailer in the United States. The Company also manufactures and processes some of the food for sale in its supermarkets. The company has earnings due out on 3-3-11 (projected).

Over 10,000 contracts have traded today on total daily average option volume of just 2,665. The largest trade accounted for 10,000 contracts -- an Apr 22/24 strangle sale 5,000x @ $0.91. Color from Mike Bristow of the V-trader Group. $The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls and puts are mostly opening (compare OI to trade size). This is a vol sale ahead of earnings in the second month -- so a straight vega bet.

The Skew Tab snap (below) illustrates the vols by strike by month.

The skew actually looks pretty normal. Even more odd, the Apr vol is up more than Mar today. As of this writing, Mar vol is at 32.81 (+1.1) and Apr vol is at 27.91 (+1.4),

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see the vol is rising into earnings (as expected). On the last earnings cycle KR went down 13.5% in the few days following the release. IV30™ went up to 29.20 last cycle, and it's now above that level as of today. The vol sale is a bold move, we'll see what happens.

This is trade analysis, not a recommendation.

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