Market Insights

Most stocks have been falling, but options traders could be looking for a rally in Kraft Heinz.

This unusual activity was detected yesterday in the owner of brands like Oscar Meyer and Jell-O:

• 13,000 March 33 calls were purchased for $0.68.
• 13,000 March 31 puts were sold for $0.12.
• Volume was more than 25 times open interest at both strikes, which suggests new positions were opened.

Calls fix the level where a security can be purchased, so they may appreciate when stock prices rise.

While owning puts is the opposite, selling them can be similar to owning stock: Traders collect a credit now and agree to buy shares if they fall to a certain level. (In this case $31.) If KHC stays above that price, he or she keeps the premium collected. (Note: Selling puts can be highly risky because they have significant downside risk.)

Buying calls and selling puts at the same time creates a synthetic long position. The strategy potentially simulates owning 1.3 million shares for a fraction of the cost.

Kraft Heinz (KHC), daily chart, with select patterns and indicators.

Delta can help explain Monday’s trade because long calls and short puts both have positive delta. Here’s a quick memory trick for understanding options Greeks like delta and gamma.

KHC rose 0.12 percent to $32.22 yesterday. The food company missed revenue estimates on February 12, which pushed its stock to the lowest level since the pandemic. But it rebounded as tariff-weary investors flocked to consumer staples. Reuters also reported it wants to divest its Plasmon baby-food business.

Monday additionally saw heavy activity in the 14-March 32 calls and the March 33.50 calls. Overall options activity in KHC was about 3 times greater than average over the last month, according to TradeStation data.

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