By David Russell
Kroger's (KR) volatility has spiked since late April, and one trader is looking for the grocery stock to return to its slow-moving ways.
optionMONSTER's tracking systems detected the sale of 9,100 October 20 puts and 9,100 October 24 calls, more than 13 times open interest in each strike. Both priced for about $0.85, resulting in a credit of $1.70.
The trade, known as a short strangle, is designed to generate income from the shares remaining trapped in a range. It came after KR's implied volatility surged to about 30 percent from 23 percent about two weeks ago, which drove up option premiums. (See ourEducation section)
The stock fell 0.18 percent to $22.12 yesterday. It's been tanking and experiencing greater volatility since April 29, when rival Safeway reported weak earnings and issued disappointing guidance.
Given the credit the trader earned from selling the calls and puts, he or she will a make money as long as KR remains between $18.30 and $25.70 on expiration.
The transaction pushed overall options volume in the stock to eight times greater than average.
(Chart courtesy of tradeMONSTER)
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