Shares of packaged food company The Kraft Heinz Company (KHC) are up about 12 percent over the past year. One trader sees a further long-term uptrend for shares playing out through next summer.
That’s based on the July 2023 $45 calls. With 233 days until expiration, 3,195 contracts traded compared to a prior open interest of 216, for a 15-fold rise in volume on the trade. The buyer of the calls paid $1.09 to make the bet.
Kraft Heinz shares recently traded for about $39, so the stock would need to rise $6, or about 15 percent for the option to move in-the-money. That is a bit aggressive, especially as the stock’s 52-week high, set back in the spring, is just under $45 per share.
Revenue is up about 2 percent over the past year, and profitability has dropped somewhat as inflation has taken hold. Yet shares trade for around 15 times earnings, a fair price for a large-cap food play with a number of well-known brands.
Action to take: Shares are worth accumulating in the low $40 range. The stock is a dividend growth play with a current yield of 4.1 percent, offering strong income right now.
For traders, the option is an inexpensive play on a big move higher. While the trade may not move in-the-money, traders can likely still see high double-digit gains or better well before the option expires.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.