Option Traders Brace for Wal-Mart Stores, Inc. (WMT) Earnings

Wal-Mart Stores, Inc. (NYSE:WMT) will unveil its fourth-quarter results ahead of tomorrow's open

Feb 17, 2016 at 2:37 PM
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Just weeks after announcing it will shutter 269 stores, retail behemoth Wal-Mart Stores, Inc. (NYSE:WMT) -- along with this notable casino concern -- will unveil its fourth-quarter earnings report ahead of tomorrow's open. Ahead of the event, the stock is getting a lift from the broader equities market, up 0.6% at $66.29, and option traders are split right down the middle.

By the numbers, about 15,000 calls have changed hands today, compared to roughly 14,000 puts. This is about on par with WMT's average intraday pace. Most active so far is the stock's February 67 call, where it appears new positions are being purchased. If traders are indeed initiating new long positions here, the goal is for WMT to rally north of $67 by week's end, when front-month options expire.

More broadly speaking, pre-earnings speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have been lining up on the bearish side of the fence at a rapid-fire rate. Specifically, WMT's 10-day put/call volume ratio of 1.49 sits above all other readings taken in the past 52 weeks.

Given WMT's recent run up the charts, some of this put buying could be a result of shareholders protecting paper profits. Year-to-date, WMT has now tacked on over 8% -- and is one of the best performing Dow components in 2016, second only to Verizon Communications Inc. (NYSE:VZ) -- but is stalling out near its 200-day moving average. This trendline is currently located at $66.62, and has contained WMT's advances so far this month.

Regardless, those purchasing Wal-Mart Stores, Inc.'s near-term options are encountering lofty volatility expectations. As is often the case ahead of scheduled events, WMT's 30-day at-the-money implied volatility is inflated, last seen at 26.8% -- in the 95th percentile of its annual range.

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