Trump Praise Fails to Slow Bearish Betting On Wal-Mart Stores Inc (WMT)

While President-elect Donald Trump praised Wal-Mart Stores Inc's (WMT) plans to create new jobs, put volume is accelerated once again today

Jan 17, 2017 at 3:33 PM
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Despite a down day for the broader stock market, Wal-Mart Stores Inc (NYSE:WMT) is keeping its head above water -- last seen trading up 1.9% at $68.42, the leader among Dow stocks. Earlier, the retailer said it would create roughly 10,000 new U.S. jobs as part of a bigger effort by Donald Trump, a move that was applauded by the president-elect via his Twitter account. WMT options traders are getting in on the action, too, with volume running at two times what's typically seen at this point in the day -- although most of the activity has occurred on the put side.

By the numbers, 38,650 WMT puts have changed hands so far, compared to 19,984 calls. Most active is the stock's February 65 and 67.50 puts, which may have been used to initiate a ratio spread. Specifically, it looks like one trader may have sold to open 7,400 February 65 puts and bought to open 3,700 February 67.50 puts. If this is the case, the speculator expects WMT to retreat below $67.50 -- but find a floor near $65 -- over the next five weeks.

Widening the sentiment scope reveals today's put-skewed session is just more of the same in WMT's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 2.14 ranks in the 88th annual percentile. In other words, puts have been bought to open over calls at a faster-than-usual clip.

In fact, total put open interest of 344,337 contracts is docked in the 98th percentile of its 12-month range, compared to 305,382 calls -- in the middling 45th annual percentile. Among near-term contracts, WMT's Schaeffer's put/call open interest ratio (SOIR) of 1.02 ranks higher than 98% of all comparable readings taken in the past year. Said simply, short-term speculators have rarely been as put-heavy toward WMT as they are now.

Drilling down on the front-month series, peak put open interest is located at the January 2017 65 strike, with 23,764 contracts outstanding. This could create an options-related floor for WMT through week's end, as the hedges related to these bets are unwound ahead of Friday's expiration.

Technically, WMT has struggled since topping out at an annual high of $75.19 in late August, down 9%. Nevertheless, although the shares are staring down historical headwinds, they have once again bounced from the $67.50 mark. This level supported a mid-October pullback, and stands at a 61.8% Fibonacci retracement of Wal-Mart Stores Inc's (NYSE:WMT) May-to-August rally.

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