September 5, 2018

On A Shopping Spree With Kroger Company

Senior officials from the U.S. and Canada are due to meet in Washington today in a bid to settle major NAFTA differences amid pressure from the Trump administration. “No NAFTA is better than a bad NAFTA deal for Canadians and that’s what we are going to stay with,” Justin Trudeau told reporters, stating he would insist on keeping the Chapter 19 dispute-resolution mechanism and existing protections that ban U.S. media firms from buying Canadian cultural industries.

Source:  Seeking Alpha

Let’s consider Kroger Company (Ticker: KR):

 

The VantagePoint platform recently indicated upside momentum.

Using the predictive indicators embedded within the VantagePoint platform and its predictive AI technology, we will point out four significant things. We have a bullish crossover indicated by the blue predictive indicator line crossing above the black simple moving average on September 4th.  We can combine that with the VantagePoint propriety neural index indicator moving from the RED to the GREEN on August 28th.  This indicator measures strength and weakness for a 48-hour period, in this case strength.  The move to the GREEN position further makes the case for a potential bullish scenario. We also have the predicted high and low above yesterday’s actual high and low indicating further strength.  Finally, we have all three predictive differences solidly positively sloped which indicates continued bullish momentum.  I want to play the VP continued bullish indication.

Strategy Discussion

For active traders with a shorter investment time horizon, you can consider a setup utilizing options. Given the market conditions outlined above, taking an active, premium debit approach may be the best path to success.

Because of the reasons given above, the purchase of a debit call spread may be one way to approach this situation.  You will first want to calculate your target strike.  In order to do this, you will need three pieces of data:  current price, expiration date and the implied volatility associated with that expiration date.  For KR, that yields a target strike of ~$34.50.  You may want to consider the KR September 21st regular monthly expiration 33/34.5 call spread, buying it for $0.39.  The most you can lose is the premium paid and the most you can gain is the width of the spread less any premium paid.  Max risk = $0.39 and max reward = $1.11

This means that you are getting odds of 2.85:1.

Given the trading and market environment outlined above, a trader must evaluate whether this reward/risk ratio is appropriate for his/her risk tolerance.

If you would like to learn more about the VantagePoint platform and take advantage of the exclusive offer that our clients enjoy, please visit:

https://discover.vantagepointsoftware.com/prosper-demo/

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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