September calls bet on a rebound in shares.
It’s been a tough year for Kraft-Heinz (KHC). But at least one trader is betting that the company’s post-earnings drop will see a bounce within the coming weeks.
On Tuesday, over 12,600 contracts traded on a September $27.50 call option, a nine-fold surge in volume. With 37 days to go, it’s a bet that shares will rally about $1.20 from their current price of about $26.30, or about 4.6 percent.
- Crash Warning: Everything just changed
After 18 months of near vertical gains…the greatest bull run in history is starting to falter. And while some experts are urging investors to "buy the dip"…others are warning that the worst crash in financial history is straight ahead. Who's right…who's wrong? And more importantly, what should you do with your money right now to get ready?
The answer could save you potentially hundreds of thousands of dollars in the coming weeks.
Make no mistake, a major market shift is already underway... and this is the exact day it's going to hit U.S. stocks.
Kraft-Heinz, the branded food giant, has written off over $16 billion in value year to date, mostly reflecting that it overpaid to merge the two companies together, and is more of an accounting issue rather than a fundamental decline.
However, sales are also down slightly in the past few years, as consumers have shifted to being less brand conscious than in the past. Shares are down over 55 percent in the past year, against a modest gain for the stock market.
Action to take: We like the option trade as a speculation. At around $0.55, or $55 per contract, it’s set up nicely to take advantage of a short-term bounce in shares.
Longer-term investors should consider shares here, as the drop in price has pushed the dividend yield north of 6 percent— a great entry price even if shares continue to struggle for some time.