Options Traders Pile on Walmart Stock After Earnings

The stock scored a record high this morning

Deputy Editor
Aug 18, 2020 at 10:26 AM
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Mega-retailer and blue-chip Walmart Inc (NYSE:WMT) stepped up to the earnings plate this morning and hit it out of the park. Walmart's earnings and revenue were both well above Wall Street's estimates, while U.S. comparable-store sales rose over 9% -- easily topping the 5.4% expectation. Furthermore, e-commerce sales in the U.S. doubled from last year, as shoppers rushed to spend their stimulus checks, boosting sales in general merchandise and food.

Walmart stock surged to a record high of $137.63 out of the gate today, but has since pivoted lower to trade down 0.8% at $134.71, after a spokesperson warned on the conference call that back-to-school sales will be negatively impacted by covid-19.

After an 8% win for the month of July, WMT has spent August consolidating above support at its 30-day moving average. Perhaps today's breather can be explained by the stock's 14-day Relative Strength Index (RSI) of 68 last night, sitting on the cusp of "overbought" territory, meaning a short-term breather may have already been in the cards. 

Options traders today are scrambling toward Walmart stock. In just the first hour of trading, 112,000 calls and 38,000 puts have crossed the tape -- thirteen times the intraday average with volume running in the 100th annual percentile. The weekly 8/21 140-strike call is the most popular, followed by the January 150 call.

The preference for calls is nothing new. This is per WMT's 50-day call/put volume ratio of 5.00 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than all but 10% of readings from the past year. This implies options traders have rarely been more call-biased in the last 12 months. 

Options appear to be an intriguing route though. WMT sports a Schaeffer’s Volatility Index (SVI) of 28% is in the 23rd percentile of its annual range. This suggests options have been pricing in relatively low volatility expectations right now. 

 

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