Bears ring up big gains at Kroger

Kroger plummeted to multi-year lows on poor quarterly results today, resulting in huge profits for downside option positions.

On June 7, Investitute’s proprietary programs found that 3,200 June $30 puts were purchased for $0.90 to $0.95 with shares at $29.80. Volume was well above the strike’s open interest of 2,201 contracts, showing that this represented fresh buying.

Today those puts traded for $5.60, a gain of about 500 percent in a little more than a week. The stock was down some 17.8 percent in that time, underscoring how options can far outperform their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

KR plunged 18.89 percent to $24.56 today. The supermarket-chain operator fell to its lowest level in nearly three years after announcing weak sales and guidance this morning.