Wal-Mart Stores, Inc. (WMT) Collapse Sends Traders Into a Frenzy

Wal-Mart Stores, Inc. (WMT) is staring at its worst single-day performance since early 2000

by Alex Eppstein

Published on Oct 14, 2015 at 11:49 AM

Wal-Mart Stores, Inc. (NYSE:WMT) is getting demolished today, after Chief Financial Officer Charles Holley said he expects per-share earnings to decline up to 12% in fiscal 2017 -- a warning that's overshadowing a newly unveiled $20 billion share repurchase program. At last check, the shares are down nearly 9% at $60.80, and earlier bottomed at a three-year low of $60.12. Amid this collapse -- the stock's worst in over 15 years -- WMT's options pits are packed.

Overall, intraday volume is at eight times the usual, with calls holding a slight edge over puts. The now out-of-the-money January 2016 62.50-strike call is among the most active options, and is seeing buy-to-open activity, as long-term traders keep the faith -- expecting WMT to re-take the $62.50 level by January 2016 expiration. On the other hand, short-term bears think the shares will breach the round $60 mark by Friday's close, buying to open the October 60 put.

Certainly, from a longer-term perspective, bearish bets have been more popular than bullish. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), WMT's 10-day put/call volume ratio of 0.94 registers just 10 percentage points from a 12-month peak. In other words, traders have been buying to open puts over calls at a near-extreme rate in recent weeks. Along similar lines, the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.87 ranks in the 86% annual percentile, hinting at a pronounced put-skew among short-term speculators.

Option traders aren't the only ones with doubts about WMT. Of the 22 analysts tracking the stock, 86% have handed out a "hold" or worse recommendation.

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