Stocks quoted in this article:
Options players from both sides of the trading fence are targeting Wal-Mart Stores, Inc. (NYSE:WMT - 69.78) today, with roughly 20,000 calls and around 21,000 puts changing hands so far, which is more than quadruple the equity's overall expected intraday volume. It appears that some near-term speculators are hoping the shares will make a definitive move immediately following WMT's quarterly earnings release next week.
Digging deeper into the data, it appears that the weekly 2/22 72.50-strike call has seen approximately 1,700 contracts exchanged at a volume-weighted average price (VWAP) of $0.13, while nearly 1,200 contracts have traded at the weekly 2/22 67.50-strike put at a VWAP of $0.34. The majority of these options crossed at the ask price, pointing to buyer-fueled activity. Since today's volume has exceeded present open interest levels at both strikes -- while implied volatility has ticked higher during the course of the session -- it can be assumed that new positions are being initiated here.
Breaking it down even further, the call buyers are expecting WMT to rise north of $72.63 (strike price plus the VWAP) by the close on Feb. 22, when these weekly options expire. This reflects a 4.1% increase over current levels. Meanwhile, the put buyers are counting on the stock to retreat below $67.16 (strike price less the VWAP) by next Friday -- representing a decline of 3.8%. Either way, the most these options players stand to lose is the initial premium paid.
From a broader sentiment scope, however, WMT calls seem to have the upper hand over puts. The equity's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 1.55, indicating traders have bought to open 155 calls for every 100 puts during the past two weeks. This ratio ranks higher than 63% of other such readings taken within the past year, meaning speculators have been scooping up bullish bets over bearish at an accelerated clip.
On the technical front, the popular broadline retailer has advanced more than 14% on a year-over-year basis. What's more, despite today's 1.5% drop, the stock is still on pace to finish a third consecutive week atop its 10-week moving average, which had previously served as resistance since early November.
As previously noted, WMT is on deck to reveal fiscal fourth-quarter earnings ahead of the open on Feb. 21, and has bested consensus bottom-line estimates in three of the past four quarters. Analysts are expecting a per-share profit of $1.57. Should the company pull off another positive earnings surprise, today's bears could find themselves scrambling for the exits.