Can This Retail Giant Hit New Highs by Christmas?

One spread trader is looking for WMT to hit new record highs by December options expiration

Nov 24, 2017 at 11:56 AM
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With Black Friday retail sales events in full swing, mega-retailer Wal-Mart Stores Inc (NYSE:WMT) is attracting attention from options traders. Today's call volume of 24,000 contracts represents about 150% of the stock's intraday norm, and a decent portion of the day's action consists of short-term call spreads.

Not long after the opening bell, data from the International Securities Exchange (ISE) indicates one speculator bought to open over 2,100 weekly 12/1 95-strike calls, while simultaneously selling to open a matching block of weekly 12/1 97-strike calls. This long call spread attains its maximum potential profit if WMT settles at or above $97 by the time the closing bell sounds on Friday, Dec. 1.

Separately, a similarly bullish call spread was opened around 10 a.m., when one trader bought to open 1,000 contracts of the WMT December 101 call and sold to open 1,000 contracts of the December 102 call. As with the debit spread detailed above, this best-case scenario for this bull play is for WMT to end at or above the higher sold strike -- in this case, $102 -- by the time front-month options expire on Friday, Dec. 15.

Unlike the weekly 95/97-strike strategy, however, this December 101/102 spread calls for WMT to reach new record highs in less than a month's time. The shares gapped drastically higher last week on well-received earnings, and WMT set its reigning record high of $100.10 just last Friday, Nov. 17. At last check, Wal-Mart stock is up 0.4% at $96.76, joining the majority of its fellow Dow components in positive territory.

Amid the equity's positive price action, bullish attention from options traders has become par for the course. The stock's 10-day call/put volume ratio stands at 2.11, per buy-to-open data from the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This reading arrives in the 86th percentile of its annual range, suggesting that speculative players have shown a stronger appetite for bullish bets over bearish just 14% of the time in the last year.


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