An unwinding of pessimism could further boost the shares
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Grocery store chain Kroger Co (NYSE:KR) just reclaimed its March highs and the +10% year-to-date level. The shares also found strong support at their 50-day moving average during this week’s volatility.
Large call open interest (OI) expires at the 65 strike after the April expiration, allowing the price to move higher in the coming months. Plus, KR is showing signs of life now that the ill-fated merger with Albertson’s has run its course and the former CEO resigned.
The equity's gamma-weighted Schaeffer's open interest ratio (SOIR) is above 1.0, which has previously been indicative of bottoms in price in the past. Specifically, March 3-4 of 2025 and December 6-9 of 2024.
An unwinding of pessimism could provide tailwinds as well. There is upgrade potential, as nine of the 20 analysts in coverage carry a “hold” or worse rating. Furthermore, short interest remains 322% higher than the levels in November 2024, representing 5.8% of the stock’s available float. It would take shorts over five days to cover, at Kroger stock’s average pace of trading.
Our recommended call option has a leverage ratio of 7.1, and will double on a 13.6% rise in the underlying shares.