Retail giant Walmart (WMT) is up 43% over the past year, almost doubling the overall performance of the S&P 500. One trader sees further upside for shares in the weeks ahead.
That’s based on the October 4 $81 calls. With 18 days until expiration, 23,254 contracts traded compared to a prior open interest of 105, for a massive 221-fold rise in volume on the trade. The buyer of the calls paid $0.76 to make the bullish bet.
Walmart shares recently traded for just under $80, so the stock would need to rise by $1, or about 1.5%, for the option to move in-the-money. Shares have a 52-week high right at $79.99, and the stock has been in a strong uptrend.
The retailer has been performing well, thanks to a focus on keeping costs down. And shoppers tend to spend more at Walmart relative to other retailers when there’s a perception the economy is slowing.
Action to take: Momentum investors may like shares here, given their strong uptrend since early August. Walmart also pays a 1% dividend at current prices, and has a history of increasing its payout over time.
For traders, the October 4 $81 puts are aggressive, but shares could continue trending higher even if the rest of the market trades lower in the coming weeks, given Walmart’s defensive nature. Investors can likely see high double-digit returns.
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 company mentioned in this article.