Will Kamala Crush Kroger?

Kamala Harris Takes On Grocery Stores

In a speech last week, Vice President Kamala Harris proposed cracking down on price gouging (or as she called it, “price gauging”) by grocery store chains to fight food inflation.

OMG. Kamala said "Price Gauging" instead of "Price Gouging"…

I get misspelling it, but how do you not realize you are saying the completely wrong word?pic.twitter.com/e0EzVRFeol

— Jeff Carlson (@themarketswork) August 16, 2024

A number of media observers suggested that Harris’s proposal was akin to price controls.

🚨🚨🚨 CNN admits Kamala's plans for price controls has been a disaster everywhere.

"We‘ve seen this kind of thing tried in lots of other countries before. Venezuela, Argentina, the Soviet Union…it leads to shortages" and would "cause a lot of harm."

pic.twitter.com/V3meSQbFkL

— Wall Street Silver (@WallStreetSilv) August 16, 2024

Of course, the problem with blaming supermarket chains for food price inflation is that they all operate on razor-think profit margins. The Kroger Company KR, for example, according to Chartmill data, which is better than 63% of its industry.

Kamala Harris Insurance For Kroger

If you own shares of Kroger, you may be concerned about the prospect of a President Kamala Harris imposing price controls. The TikTok video below uses the Portfolio Armor iPhone app to find two cost effective ways of hedging KR. Since we’re concerned specifically with political risk here, both hedges extend past November’s election.

@dpinsen

♬ Lost in the Supermarket – The Clash

As you can see below, the optimal collar shown in that video has a negative cost.

This means that you would have collected a net credit of $420 when opening this hedge. That’s assuming, to be conservative, that you bought the puts at the ask, and sold the calls at the bid. In practice, you can often buy and sell options within the bid-ask spread, so your net credit in this case would likely have been more than $420.

We may add some directional trades related to the election on our trading Substack. You can subscribe below, if you’d like a heads up when we place them.

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You can scan for optimal hedges for individual securities, find our current top ten names, and create hedged portfolios on our website. You can also follow Portfolio Armor on X here, or become a free subscriber to our trading Substack using the link below (we’re using that for our occasional emails now).