Call Buyers Line Up for Grocery Names: Options

By Jud Pyle, CFA, chief investment strategist for the Options News Network

NEW YORK (TheStreet) -- At least one investor is taking a bullish stance on grocery name Kroger (KR Quote) and boosting call volume without any significant news from the company. This comes the day after we saw another investor buying calls in SuperValu(SVU Quote).

The slightly out-of-the-money April 20 calls have changed hands nearly 23,000 times so far today and are home to current open interest of 661 contracts, indicating investors most likely traded these contracts to open. These calls are up 12 cents so far on the day, computing to an implied volatility of 28.7. One call buyer bought these calls for approximately $2 each, meaning bullish traders who bought the April 20 calls need KR shares to expire higher than $22 to make money. Keep in mind that if KR shares rise significantly, investors could choose to sell the calls and take profit even if the stock is not higher than $22.

KR shares are currently up nine cents to $20.73 so far today. The April 20 calls have a delta of 60 cents, meaning for every dollar move in the underlying, these options should climb 60 cents. That means these calls should have moved up about six cents, but call-buying activity is pushing the prices higher than delta would suggest. Normal daily option volume in KR is approximately 2,200 contracts, and the call-buying action we've seen already far trumps this figure.

I discussed heavy call-buying action in SVU during yesterday's Sidewinder report, where we saw call buyers in the Jan. 17.5 call series. It's interesting that neither SVU nor KR reported any significant news yesterday or today, but SVU is scheduled to announce earnings figures on Oct. 20 (after October options expire). KR already announced earnings on Sept. 15, so investors could be preparing for further upside following the SVU report.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.