How We Scored Huge Gains with Wal-Mart Call Options

We were able to double our money by buying in-the-money Wal-Mart weekly call options

by Josh Selway |

Published on Apr 20, 2017 at 2:17 PM

Subscribers to Schaeffer's Weekly Options Trader service recently saw a more than 100% gain thanks to Wal-Mart weekly 4/13 67.50-strike calls. Below is a brief recap of how WMT stock crossed our bullish radar, and how a subsequent rise in the shares produced big gains for weekly call buyers. 

We recommended the WMT 67.50 calls back on March 28. At the time, the stock was trading near $70, just above its year-to-date and year-over year breakeven levels, as well as its 80-day moving average. Moreover, with Wal-Mart breaking through a channel that connected most highs since August 2016 -- a trend we noticed has often led to uninterrupted gains going forward -- it seemed like an opportune time for a well-leveraged, short-term options play. 

On top of this promising technical setup, options data also suggested it was an attractive time to go long WMT, from a contrarian standpoint. For instance, there was a large accumulation of put open interest just below where the shares were trading, which we believed could act as options-related support in the near term. 

What's more, it was also an opportune time to buy options, as short-term contracts were pricing in unusually low volatility expectations. This was evidenced by WMT stock's Schaeffer's Volatility Index (SVI), which at the time ranked in just the 5th annual percentile. 

Almost immediately after entering our position, Wal-Mart shares began to rally. When we closed out position on April 13, the stock was trading near $73.50. 

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