3 Ways to Play Unusual Options Activity in Kraft Heinz (KHC) Stock

On a day in which all three major U.S. indexes gained more than 1%, Kraft Heinz (KHC) and other packaged food company stocks lost ground on Thursday due to a poor earnings report from Campbell’s (CPB) and Tyson Foods (TSN), which  cut its 2026 sales growth. 

Although there was no specific news from Kraft Heinz, Campbell’s cut its dividend by 36% and implemented a new $500 million cost-saving plan; investors were clearly worried that KHC would soon face the same fate as growth continues to be hard to come by for packaged food companies. 

As a result, KHC share volume was 24.25 million, 1.6 times the 30-day average, while options volume was 2.5 times higher than average at 90,246.

Due to the high options volume, KHC also had several unusually active options. They ranged from a Vol/OI (volume-to-open-interest) ratio of 20.10 at the high end to 1.99 at the low end. 

Taken together, the six unusually active options offer investors several potential money-making opportunities. 

Here are three possibilities for aggressive investors to consider this Labor Day weekend. 

Have a good one!

The KHC Options in Question

As you can see, we’ve got five calls and just one put with DTEs (days to expiration) ranging from 8 to 506 days. Except for the Sept. 11 $24.50 call, all of the volumes averaged around 3,840. Not huge, but not insignificant either. 

At this point, I usually look at yesterday's options flow to see what big fish were biting. I see four trades of 1,000 contracts or more. These will be the foundation of the options strategies in play. 

KHC’s Sept. 18 $25.50 Put

The largest of the four, the 3,850-contract trade at 1:42 p.m. ET, was 94.5% of the put’s total volume yesterday. Interestingly, it was a single-leg trade at the ask price of $0.81, which means it was a new long position. 

One of two things is at play here: either the institution is protecting a long position in the stock — up more than 10% since late June —or, more likely, they are betting that KHC will incur more losses over the next two weeks. 

Here’s how the long put looked at yesterday’s close. Slightly ITM (in-the-money), the breakeven based on the $0.89 ask price was $24.61, 3.19% below the closing price of $25.42. On the 3,850 trade, the breakeven was $24.69, 2.87% below the $25.42 share price at the time of the trade. 

The expected move is 3.68%, so there’s a good chance the institution betting against KHC’s share price won’t lose money, even if it doesn’t make a windfall profit. It’s a low-risk, low-reward bet. 

KHC’s Sept. 18 $20 and $22.50 Calls

These two calls, expiring in two weeks, had the highest and second-highest daily volume of the six: 5,045 for the Sept. 18 $20 call and 5,062 for the $22.50 call. Looking at the options flow, it becomes clear that a Bull Call Spread is at play. 

But not just one: 14 in total, starting at 2:12 p.m. ET and ending at 2:34 p.m. ET, all with 360 contracts for each of the two sides of the bull call spread. This suggests an institution made one large trade for 5,040 contracts and split it into 14 more manageable pieces. 

The bull call spread information shown below is early in Friday trading. It’s merely an example. 

The bull call spread is a bullish, defined-risk bet that involves buying a long call and selling a short call at a higher strike price to lower the cost of the long call. 

The maximum loss (Net Debit) is the difference between the premium for the long call and the premium received for the short call. In the example above, that’s $2.40 [$2.68 ask price for $22.50 call - $0.28 bid price for $25.50 call]. The maximum profit of $0.60 is the difference between the strike prices less the net debit [$25.50 strike price - $22.50 strike price - $2.40 net debit]. The risk/reward ratio of 4.0 to 1 is high. 

The maximum loss and maximum profit for the trade at 14:12 were $2.44 [$5.43 trade for long $20 call - $2.99 trade price for premium from short $22.50 call] and $0.06, respectively, for a much higher risk/reward ratio of 40.67 to 1. 

Why would an institution accept this lopsided bet? 

Because the probability of success is quite high given that the long $20 call is deep ITM, the breakeven on the first trade was $22.44 [$20 long call strike price + $2.44 net debit]. Maximum profit is $22.50, well below the share price at the time. 

A Bullish LEAPS Ahead for KHC?

The final possibility from yesterday involves the Jan. 21/2028 $15 LEAPS (Long-Term Equity Anticipation Securities) call. It had a volume of 2,275 on the day. Two trades at different times accounted for 91% of the volume. 

I’m interested in the 1,000-contract trade. As you can see from the code, it was a single-leg trade to open a new position. Because the trade price of $10.50 is closer to the ask than the bid, I suggest it was a long-term bullish bet, where the buyer was willing to pay $10.50 a share for a 17-month bet that Kraft Heinz will get its act together. 

With a delta of $0.9628, the call’s value will increase almost dollar for dollar with the share price; the buyer is using a stock replacement strategy to reduce the capital outlay by 59%. The biggest downside is that they won’t be able to benefit from Kraft Heinz’s 6.3% yield. 

The likelihood of the share price being over the $25.50 breakeven in 505 days is around 50%. That means the institution can put the $15 per share it didn’t spend on the stock toward something else with a more immediate return. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.