Wal-Mart Stores, Inc. (WMT) Traders Split on End-of-Week Path

Wal-Mart Stores, Inc. (NYSE:WMT) has taken a nosedive, following its first-quarter earnings miss

May 19, 2015 at 10:49 AM
facebook twitter linkedin

It's a pretty dreary day for Wal-Mart Stores, Inc. (NYSE:WMT), with the shares off 3.9% at $76.81, thanks to a first-quarter earnings miss and a price-target cut to $81 from $82 at Deutsche Bank. The big drop has sparked a rush of activity in WMT's options pits, with overall volume running at nine times the average intraday pace.

Drilling down, weekly option traders are split on the equity's near-term trajectory. Specifically, buy-to-open activity has been detected at WMT's weekly 5/22 77-strike put and 78-strike call. Simply stated, put buyers are betting on the security to extend its decline south of $77 through week's end -- when the series expires -- while call buyers are betting on a quick rebound north of $78.

Widening the sentiment scope reveals it's been long calls that have been preferred on WMT in recent months. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day call/put volume ratio of 3.12 rests higher than 82% of all comparable readings taken in the past year.

On the charts, WMT has been in a steady downtrend since topping out at its record peak of $90.97 in mid-January, off 15.6%. What's more, today's post-earnings plunge has shares of Wal-Mart Stores, Inc. (NYSE:WMT) on pace for their lowest close since early November. Regardless of where the stock settles the week, today's option buyers can rest easy knowing the most they stand to lose is the initial premium paid -- and currently, WMT's short-term options are priced at relatively low levels.

Special Offers from Schaeffer's Trading Partners