Unusual Options Activity: Kraft Heinz Corp (KHC)

Shares of food conglomerate Kraft Heinz Corp (KHC) have been gradually trending higher over the past few months. One trader is betting on a further rally in the coming weeks.

  • Special: This Company’s Share Price has Increased 1650% Since 2016
  • That’s based on the December 3 $36 calls. Expiring at the end of next week, over 20,817 contracts recently traded, a 135-fold jump from the prior open interest of 154 contracts. The buyer of the calls paid $0.28 to make the trade.

    Shares last went for about $35 per share, so the stock would need to rise only about 3 percent for the trade to move in-the-money. That’s possible, but unlikely, given the small amount of time left on the trade.

    The stock is up a scant 8 percent in the past year, far underperforming the S&P 500. Revenue has been slightly down, and the company’s profit margin is under 10 percent, likely why shares have pulled back from a high of around $45 per share.

    Action to take: Shares should continue trending higher over time, likely at a faster pace than in the past year, although investors shouldn’t expect tech-like returns. Investors can get a starting dividend yield of 4.5 percent to start investing.

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  • Traders could get a quick double trading the December call options, although any bounce higher in shares should lead to a quick sale.

     

    Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.