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Kroger Co. (NYSE:KR)One opportunistic options player initiated sizeable buy-writes on beleaguered retail grocery chain operator, Kroger Co., today. Shares of the largest U.S. grocery store chain fell as much as 10.5% during the session to touch an intraday low of $21.35 after the firm reduced the top-end of its full-year earnings forecast from $1.80 a share to $1.78 a share. Kroger revealed its performance for the third quarter ahead of the opening bell this morning, earning $0.32 a share in the quarter, versus a loss of $1.35 a share in the same period last year. Comments from the firm’s CEO during a conference call also helped KR shares fall the most in more than a year. Kroger CEO, David Dillon, remarked on the competitive industry that’s vying for a thriftier customer in the midst of an economic recovery that is more drawn-out and less robust than expected. Yet, one trader apparently sees today’s circumstances as the perfect time to take a long-term bullish stance on Kroger. The contrarian player sold around 7,326 calls at the January 2012 $22.5 strike at a premium of $1.90 apiece and purchased about 672,600 shares of the underlying stock at an average price of $21.79 a share. Selling the calls further discounts the cost of getting long the shares to $19.89 and provides an effective exit strategy should shares in Kroger Co. recover sharply by January of 2012. The covered call strategy has maximum potential gains of 13.12% baked in at the outset. Kroger’s shares must rally at least 5.4% over today’s low of $21.35 to get back up over $22.50 by the time the options expire. The investor appears happy to have the shares called from him at $22.50 a-pop in the event that the calls land in-the-money by expiration day in just over one year’s time. Shares in Kroger Co. were trading at a new 52-week high of $24.14 on Wednesday afternoon. The overall reading of options implied volatility on the stock is down 16.1% to arrive at 23.83% post-earnings.

Krispy Kreme Doughnuts, Inc. (NYSE:KKD)Bulls are bingeing on Krispy Kreme call options today after the firm sweetened its outlook for 2011 operating income to a range of $17 million to $20 million, up from previous estimates of $13 million to $17 million. The maker of the popular Original Glazed doughnut said it earned $2.4 million in the third quarter, or $0.03 a share, after the closing bell on Wednesday. Analysts, on average, were expecting KKD to post a third-quarter loss of $0.01 a share. Shares in Krispy Kreme jumped 19.8% following earnings to hit an intraday- and new 52-week high of $7.38 today. The better-than-expected earnings report and rosier outlook for next year’s performance inspired strong demand for call options on the doughnut maker. More than 5,480 options, nearly all of them calls, changed hands on Krispy Kreme by 12:55 pm in New York, versus overall previously existing open interest of 6,271 contracts. Investors purchased more than 1,340 calls at the December $7.5 strike for an average premium of $0.22 a-pop. Call buyers make money if Krispy Kreme’s shares rally another 4.6% over today’s high of $7.38 to surpass the average breakeven point at $7.72 by December expiration. Bullish sentiment spread to the January 2011 $7.5 strike where another 1,040 call options were picked up at an average premium of $0.34 apiece. Investors holding these contracts are poised to profit should shares in KKD surge 6.3% to trade above $7.84 ahead of expiration day in January. Krispy Kreme’s overall reading of options implied volatility is lower by 9.2% to stand at 52.47% as of 1:00 pm in New York.

JPMorgan Chase & Co. (NYSE:JPM)Shares of the financial services firm are on the mend, and one bullish options strategist positioned for the rise in the price of the underlying stock to continue through expiration day in January 2011. JPMorgan’s shares are currently up 2.8% to arrive at $39.21 as of 11:35 am in New York. The investor responsible for the spread purchased 6,000 now in-the-money calls at the January 2011 $39 strike for a premium of $1.69 each, and sold the same number of calls up at the January 2011 $43 strike at a premium of $0.36 apiece. The net cost of the transaction amounts to $1.33 per contract and prepares the trader to make money should JPM’s shares rally another 2.85% to surpass the effective breakeven price of $40.33 by January expiration. Maximum potential profits of $2.67 per contract are available to the investor in the event that shares in JPMorgan surge 9.7% over the current price of $39.21 to trade above $43.00 ahead of expiration day next year. Options traders are exchanging three calls on the stock for each single put option in play thus far in session.

New York Times Co. (NYSE:NYT) Bearish options traders scooped up put options on the media company right out of the gate this morning after shares of the underlying stock declined as much as 1.98% to touch an intraday low of $8.92. NYT’s shares pared earlier losses, however, and currently stand just 0.33% lower on the day at $9.07 as of 11:50 am. According to reports, the Newspaper Association of America said that ad revenue at U.S. newspaper publishers fell at a slower rate of 5.4% in the third quarter versus a 28% dip in the same period last year. Investors expecting shares in New York Times Co. to edge lower ahead of expiration day next month purchased approximately 2,800 puts at the January 2011 $9.0 strike for an average premium of $0.77 each. Put buyers are poised to profit should the newspaper publisher’s shares plunge 9.25% from the current price of $9.07 to breach the average breakeven point to the downside at $8.23 ahead of expiration. More than 3,620 puts changed hands at the January 2011 $9.0 strike, which is more than 4.5 times the number of contracts represented by previously existing open interest at that strike.

American Eagle Outfitters, Inc. (NYSE:AEO)Shares of the retailer of clothing and accessories for the tween and teenage consumer plunged 7.8% lower at the start of the trading session after the firm said same-store sales were flat in the month of November. The sharp pullback in the price of the underlying stock appears to have inspired a rash of out-of-the-money call selling in the December contract. It looks like sellers are throwing in the towel on American Eagle, purging themselves of long call positions established back in November. Investors sold at least 5,000 calls at the December $16 strike to take in an average premium of $0.365 per contract. Open interest at that strike is sufficient to cover today’s volume and appears to have been generated on November 18, 2010, when shares opened at $16.02 and roughly 6,800 call options were purchased at the December $16 strike for an average premium of $0.17 apiece. Traders closing out long call positions still manage to turn an average net profit of $0.195 per contract. Alternatively, call sellers may be initiating fresh positions, in which case they keep the full average premium of $0.365 per contract as long as AEO’s shares fail to rally above $16.00 by expiration day in December.

Source: Thursday Options Update: KR, KKD, JPM, NYT & AEO