Author: Andrew Keene
The Kroger Co. (KR) is set to report earnings before the opening bell tomorrow morning. The stock is currently trading around $38.15 in a 52 week range of $27.32-$39.43. KR has been relatively strong this year with shares rallying nearly 19% year to date. Ahead of the catalyst event tomorrow the stock appears to be primed for a move higher.
KR has an extremely strong record on earnings day. The stock has rallied 10 of the past 12 quarters from earnings to expiry with an average move of 5.29%. The chart of KR is also setting up for a bullish move. The stock is trading well above the Ichimoku Cloud indicating a solid bull trend in KR. With a bullish historical record and solid chart setup it is difficult to justify anything but a long setup in KR.
The options market is currently implying a move of around $2.00 by December expiration which would indicate a move of around 5.2% being priced into KR. With that in mind I can calculate an upside target around $40.15. Using this target I can look for a possible trade in KR.
Trade: Buying the KR Dec 37.5-40 Call Spreads for $1.00
Risk: $100 per 1 lot
Reward: $150 per 1 lot