Unusual Options Activity: Walmart (WMT)

Shares of retail giant Walmart (WMT) sold off heavily in recent weeks, but have started to rebound. One trader sees that trend continuing through the holidays.

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  • That’s based on the December 31 $147 call. With 22 days until expiration, over 11,750 contracts traded hands compared to a prior open interest of 172, for a 68-fold surge in volume. The buyer of the calls paid $0.45 to make the trade.

    Shares recently traded around $138.50, so a strike price of $147 would require a 6 percent rally in shares by the end of the month for the option to close in-the-money.

    That is a possibility, depending on the economic news in the next few weeks. And a price of $147 would leave shares still under their 52-week high near $152.50.

    The recent decline in shares has taken the stock negative over the past year, underperforming the S&P 500 by nearly 30 points.

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  • Action to take: Shares have been knocked down to about 20 times forward earnings, a reasonable valuation for a leading retail company likely to continue to survive, no matter how the economy does.

    Investors can consider shares on a pullback like the most recent one. At current prices, shares yield about 1.6 percent.

    Traders may like the calls expiring at the end of the month, given how much more shares have to go to recover form their recent selloff. The option is inexpensive enough that it could deliver triple-digit gains in the next few weeks.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

  • Special: Every Time the Government Releases Jobs Data... Make This Trade the Night Before!
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