Guys, we have another nice opportunity this week that’s going to allow us to make a quick profit.
This time it’s a quick $100. Hey I’ll take a $100. It’s a little less than some of the other earnings plays. However, I think it is a little higher probability as well.
Kroger doesn’t move quite as much as some of the high tech plays.
In today’s video I am going to show you step by step how to make money on an easy Kroger trade!
Be sure and watch all the way to the end as I’m going to show you:
- Why is now the right time to sell a Strangle in Kroger?
- How to place a Strangle option trade in Kroger using options in the most efficient and safe manner (Showing a real example on the option trading platform)
- Finally, an extra tip to make even more money on a simple follow up trade adjustment.
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Hey guys, Darren here. We have a video for you here today.
Although before we start, if you appreciate all the research and information that goes into making a video like this, all I ask for in return is that you hit the like button or subscribe. That’s it, it helps out the channel tremendously. So thank you guys so much!
Today we are covering a stock that has earnings this week. We are going to show you the perfect option strategy and trade to make a quick profit.
I think it’s important that we understand all the different strategies and ways that the rich are getting richer. So that we can have the tools to do the same and do better for ourselves in any market while doing it safely.
I promise that we will dig into many different detailed option trading tips and tricks, and dive much deeper into options in future videos.
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Also be sure to download the FREE options Workshop in the link below.
It talks about the two main benefits of trading options over buying stocks.
DISCLAIMER, I am not a financial planner and I am not recommending trades. Please do your own research and if you are new or learning options, I recommend you start small.
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Why is now the right time for a Strangle in Kroger?
Guys, we want to sell Strangles when IVR Implied Volatility Ratings are high and when we think a stock is going to trade within a range.
Why when IVR is high? Because that is when we can collect more option premium and go wider selling our Put and Calls so that we have a larger range for the stock price to move within and still be profitable.
What stock has the perfect set up for a Strangle Option Trade right now?
Let’s take a look at the 1 year chart for Kroger ticker KR. The stock price is currently trading at $45 and IVR is high at 36 since there is earnings coming out Friday, September 8th before the bell or open for the day.
We see that there is some pretty good support at around the 44 level and resistance at around the 50 level.
IVR expands and is higher prior to earnings since if the earnings or guidance going forward is bad the stock price will likely drop.
Notice I say likely. Sometimes it does the opposite…
If the Quarterly Revenue and Earnings are good and beat expectations and the guidance going forward is good as well, what do you think happens? Most of the time the stock price moves up.
Besides just looking at the chart we should also do some research so that we know if the company is a good or bad one.
Kroger is one of the World’s largest Retail Grocers. They own many different grocery stores and are in the process of merging with Albertsons targeted for 2024.
Everyone has to eat so Kroger is pretty inflation resistant so the should be stable in the near term.
Kroger is also the biggest Sushi Retailer in America. And Gross Margins on Sushi are the highest in the store.
The forward Price to Earnings Ratio seems fairly priced at 13.
You can see there is a 2.5% Dividend and KRoger has had 17 straight years of Dividend increases.
The 1 year target for KRoger is $50 so it is basically expected to stay pretty flat.
Because of the dividend, being inflation resistant, and current price I expect Kroger to trade within about the same range it has been for the last year.
That said we should look to use a neutral option trading strategy.
So let’s show
How to place a Strangle option trade in this stock using options in the most efficient and safe manner (Showing a real example on the option trading platform)
Alright, we are going to take a look at how to sell a Strangle in Kroger on the option trading platform.
You can do this with any brokerage on any platform. We are going to the Tastytrade platform. Tastytrade is one of the best brokerages for trading options. It’s the one that I have used for years and they are the guys that developed TOS the Think or Swim platform and sold it to TD Ameritrade which is now Shwab and the one they still use.
Tastytrade is even better. Right now you can get cash back when you open an account.
I’ll put a link down below. It costs you absolutely nothing to set up an account. I do recommend that you fund it with at least a couple thousand dollars so that you can place a few different trades.
So we punch in KR in the upper left on the option platform. Make sure you are on the Trade tab.
This pulls up all of the different option chains. We will click and open the October 20 regular option chain that is 45 DTE days to expiration. At 45 Days, we can collect a good amount of premium and still go pretty wide with our strikes so that we have a large profit range that the stock price will need to stay in to be profitable.
Now a Strangle consists of selling an OTM Put Option and an OTM Call option.
We will click on the Bid to sell the 43 Put option and the Bid to Sell the 49 Call option. We collect $100 to sell this Strangle.
This trade has a 66% POP or Probability of Profit. We have a pretty good chance of winning on this Strangle trade.
Switch to the Curve mode by clicking on the upper left where it says Curve while still on the Trade tab.
Now we can see that large profit zone in green. As long as the stock price stays within that range by the end of the week on Friday, Oct 20th at close, then we keep that entire $100.
Now remember, our POP probability of profit is 66% so you know what that means.
Our probability of no profit is only 34%! I’ll take those odds….
Finally, an extra tip to make even more money on a simple follow up trade adjustment
Darren, are you always right about these trades? Are you sure it is going to be profitable and I’m going to make $100?
No…..
Trades do not always go our way. Again I like the fact that the Strangle option trade that we are placing has a 66% chance of being profitable.
And the stock price has been trading within that green profit range for most of the time over the past several months.
However, sometimes trades just don’t stay within the expected moves. Revenue and earnings come out with some unexpected results. Or management’s guidance going forward is less than desirable.
So if we are a winner, we can close out for the big win right then on the opening and bank our profits. IVR will have collapsed or dropped right after the earnings announcement so much of the premium will have come in and we will be able to close and keep much of the $100 collected.
If it is still in the middle of our strikes, we can also wait to collect all of the $100 after the expiration date..
If the stock price moves outside of our profit range there is something else we can do and I often do this.
I roll the winning side (or untested side) of the Strangle up to collect additional premium when the market opens. IVR is still in the process of coming down. We can collect additional premium, move up our profit zone and often the stock price comes back into our profit range.
One final important message:
You don’t want to put this trade on now just as you are watching this video.
Earnings comes out Friday 9/8 before the bell. The stock price may likely move between now and that time. So you want to put this trade on just prior to the close on Thursday and center your strikes.
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Alright guys, if you are a beginner and this sounded confusing do not worry. It did for me as well originally. We will be continuing to cover the details in future videos. We will continue to learn and succeed together.
I’ve put a link down below for the FREE Options Workshop. Be sure to grab that.
Remember to hit like and subscribe and leave a comment below with any questions and I’ll be sure to respond. Let me know what you are trading today and having success with.
Thanks for watching please share this video with a friend and see you in the next one!