Surge in deep in-the-money put option.
On Monday, over 2,900 contracts traded on the October $35 put options on Kraft-Heinz (KHC). This represented a 23-fold surge in volume on the options, which had a prior interest of 126 contracts outstanding.
With shares around $25.50, the put options traded at $9.50, all in-the-money. With 52 days left to go on the trade, the option appeared to offer investors nearly no time premium.
- New “Forever Battery” To Usher In New Age Of Energy
The breakthrough battery technology being dubbed as “The Tesla Killer”.
Find out why you need to act now to take advantage of this incredible opportunity.
Tech investing legend Matt McCall reveals a secretly emerging $3 trillion industry HERE.
Kraft-Heinz shares traded up with the overall market on Monday, although the company did announce that it was changing its CFO, following a year of struggling financials marked by large accounting write-downs.
Action to take: Shares are attractive here in terms of valuation and the 6-plus-percent dividend yield and look attractive for the long-term. Should the company stop making write-downs, shares will likely trade on a normalized basis at less than 10 times earnings here, a steep discount to the overall market.
However, it’s rare to get an option with nearly no time premium, and any move down in shares—even from a poor day in the markets—could increase the value of that put option even further. Speculators bearish on the stock may want to follow this trade, but with a high probability of the trade being exercised, it’ll require deep pockets to play out.