Volume Spike Investor » KFT

Kraft Stock & Options Still Under Sharp Focus (KFT)

247admin — Wed, 06 Aug 2008 12:48:40 +0000

We are still seeing high options trading in Kraft Foods Inc. (NYSE: KFT). We’d ask traders to pay close attention to these today even though these were yesterday’s most active contracts yet again. The initial trade was a directionless trade meant to capture some spread arbitrage but now it is obvious that speculators have also started jumping in now that Kraft stock is up about 10% in just 7 trading sessions since this trend started. Below is the AUGUST 2008 option matrix for the most active strikes broken down by Call/Put, options volume, and the prior open interest.

OPTION (STRIKE)       8-05        OpInt
AUG08 $35.00 CALLS    179,560   579,365
AUG08 $37.50 CALLS    61,389    208,434
AUG08 $40.00 CALLS    257,962 273,812
AUG08 $35.00 PUTS      179,511 576,381
AUG08 $37.50 PUTS 5,000      178,535
AUG08 $40.00 PUTS      5,011      245,879

The reason these are so critical is that the options are set to expire in less than ten days on Friday, August 15, 2008.

Jon C. Ogg
August 6, 2008

Kraft Foods Options Volume Going Parabolic (KFT)

247admin — Thu, 31 Jul 2008 14:11:40 +0000

This week has seen a surge in trading in stock options in Kraft Foods Inc. (NYSE: KFT). The food giant has never been this active in memory. But oddly enough these transactions may be an inefficiency that exists rather than massive gambles. Take a look at the open interest as of yesterday now:

OPTION (Mo/STRIKE)             Volume    OpInt
KFT AUG08 $35.00 CALLS     32,060    366,121
KFT AUG08 $35.00 PUTS       37,010    373,031
KFT AUG08 $37.50 PUTS   20.806    23,002

You can bet there are some speculating here, but it looks like the huge trades have been put on to capture roughly $0.10 in profit per contract. We have heard several explanations for the increase in options trading, but it appears that selling straddles in a non-directional trade is the most plausible.

As a reminder, when you see an open interest in the same month of 366,000 contracts in the same month, that is representative of more than 36 million shares on a fully leveraged basis.

JON OGG
July 31, 2008

MAJOR OPTION VOLUME ALERT: Kraft Foods (KFT)

247admin — Tue, 29 Jul 2008 16:44:30 +0000

It is a rare day that Kraft Foods Inc. (NYSE: KFT) is among the more active options trades. Today it isn’t just among them it is THE MOST active series of options trades at the CBOE. This looks like someone has unwound a major straddle trade. The long and short of this one being a zero sum game is that someone made a fortune and someone lost a fortune.

We have seen 131,700 contracts of the KFT AUG08 $35.00 CALLS trade and have seen 131,700 contracts of the KFT AUG08 $35.00 PUTS trade so far today. These are both well above the prior open interest so without knowing the options market maker nor the counterparty trader we don’t want to make any call here as to what the exact nature of or reason for the trade. It is likely that this was a form of a hedge or forward trade, but without knowing the parties we aren’t going to make any judgment on this one.

131,000 options contracts is representative of 13.1 million shares on a fully diluted basis. At 12:50 PM EST shares are up 0.6% at $31.01 and we have now seen 23.6 million shares. An average day generates trading of about 9.9 million shares and the 52-week trading range is $28.04 to $35.29.

JON C. OGG
JULY 29, 2008