Blue-Chip Mega Retailer Wavers Despite Q3 Earnings Beat

The security closed at record highs during its last four sessions

Deputy Editor
Nov 17, 2020 at 10:56 AM
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Blue-chip retailer Walmart Inc (NYSE:WMT) stepped into the earnings confessional this morning and the revelation was fantastic. Walmart's third-quarter earnings and revenue were both well above Wall Street's estimates, while U.S. comparable-store sales rose more than expected. Meanwhile, the mega-retailer's CFO said it's still early in the quarter but there is "big sales days in front of us, we expect it to be a good holiday season." 

Despite the upbeat earnings news, WMT has been relatively flat this morning, dipping lower at the open, and last seen down less than 0.1% at $152.40. This shaky price action comes after four consecutive days of record high closes, with the stock peaking at $153.40 during yesterday's session. Additionally, the equity has been guided higher by its 60-day moving average, which has also kept pullbacks in check since early July. Year-to-date, the security has tacked on 26%.

Meanwhile, options traders today are piling on Walmart stock. Already, 85,000 calls and 43,000 puts have crossed the tape -- six times the intraday average with volume running in the 97th annual percentile. The November 155-strike call is the most popular, followed by the 160-strike call from the same series. 

Options appear to be an intriguing route for investors right now. WMT sports a Schaeffer’s Volatility Index (SVI) of 27% is in the 22nd percentile of its annual range. This suggests options have been pricing in relatively low volatility expectations right now. However, Walmart stock's Schaeffer's Volatility Scorecard (SVS) ranks at a low 4 out of 100, meaning the security has tended to disappoint on these expectations during the past year -- a wary sign for premium buyers.


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