Bulls ring register in $KR

Kroger (KR) is rising sharply after earnings, revenue and guidance today, resulting in large profits on upside option positions.

On Feb. 28, Market Rebellion’s Unusual Activity Service found that 4,700 Weekly $47 calls, expiring this Friday, were bought for $1.40 to $1.45 as part of a bullish spread with shares at $46.77. This was clearly fresh buying as open interest in the strike before the activity appeared was only 516.

Those calls have traded for as much as $8.45 today, over 5.5 times their purchase prices. The stock rose 18.37% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

KR was last higher by 10.23% at $54.42 in early trade.