Mike Khouw Sees Unusual Options Activity In Kroger

Mike Khouw said on CNBC's "Options Action" that he saw more than two times the average daily options volume in Kroger Co KR on Tuesday.

The company is going to report earnings later this week and the options market is implying a move of 8.5% in either direction. This is substantially higher than the move of 5.8% that the stock has historically averaged.

Khouw noticed during the session a purchase of 2,500 contracts of the June $33.50 calls. Traders paid 86 cents for them, which sets the breakeven for the trade at $34.36 or around 6% above the closing price on Tuesday.