DailyPlay – Opening Trade (KR) – July 26, 2022

Bearish Opening Trade Signal

View KR Trade

Strategy Details

Strategy: Short Put Vertical Spread

Direction: Bullish

Details: Sell to Open 28 Contracts Aug 12, 2022 $45/$44 Put Verticals @ $0.32 Credit.

Total Risk: This trade has a max risk of $1,904 (28 Contracts x $68 per contract).

Counter Trend Signal: This is a Bullish trade on a stock that is experiencing a bearish trend.

1M/6M Trends: Bearish/Bearish

Technical Score: 5/10

OptionsPlay Score: 90

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that we will be entering this trade later today, between 3:30 pm and 3:55 pm, as we are expecting the stock to open lower today.

Investment Rationale

With the FOMC meeting results due on Wednesday afternoon, I’m not expecting a significant market move before then, barring some brand new news coming out that can alter the game. Nonetheless, today and Wednesday still have a slew of earnings reports out that can push individual stocks to double-digit gains or losses depending upon results / guidance relative to Street expectations.

However, if you want to step into the market to do something, let’s use the likely strong weakness we will see today in Consumer Staples (after Walmart again missed their earnings report last night) to sell a short-dated August 12th Kroger (KR) $45/$44 put spread. KR reports on Aug. 12th, so we will be out of this before that report comes out. When we look at its daily chart, we see a perfected Setup -9 count from yesterday (clearly it will trade lower today, so we won’t put this trade on until late in the day today), but it is also nearing three prior daily TDST support lines all right near $44 (i.e., I know that I do not want to be long if those give way).

So, after today’s likely Staples drubbing, we’ll sell this put spread sometime between 3:30 and 3:55pm and look for this to hold into this $45-$44 support area until its earnings come out in 17 days.

KR Daily