Options Volume Pops as Walmart Stock Sells Off

Spread activity has been detected in the front-month May series

by Karee Venema

Published on May 9, 2018 at 3:17 PM

Under growing pressure from Amazon (AMZN), Walmart Inc (NYSE:WMT) said it paid $16 billion for a 77% controlling stake of Indian e-tailer Flipkart. The deal is the biggest ever for the U.S. retailer, with the company saying it could lower its full-year per-share earnings by 25 cents to 30 cents. In reaction, WMT shares are trading down 2.5% at $83.60 -- the worst Dow stock on the day -- and options traders are in overdrive.

At last check, roughly 110,000 calls and 60,000 puts have changed hands on Walmart stock -- five times what's typically seen, and volume running in the 97th annual percentile. Most active are the May 87 and 90 calls, where it looks like a trader could be initiating a long call spread, or possibly rolling down her long 90 calls to the lower strike.

More broadly, the trend toward WMT across the major options exchanges has been bullish. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), options traders have bought to open 36,127 calls, compared to 11,055 puts over the past 10 sessions. The resultant call/put volume ratio of 3.27 ranks in the 92nd annual percentile, meaning this rate of call buying relative to put buying has been quicker than usual.

Looking at the charts, today's slide has Walmart stock slicing through recent support in the $86 region -- and pacing for its first close below the 320-day moving average since February 2017. Since topping out at a record high of $109.98 in late January, WMT has given back 24.4%, and the stock's breach of its 200-day trendline in late March turned this long-term floor into a ceiling. The equity is now on track for its lowest daily close since a mid-October bull gap -- which likely sparked a price-target cut to $88 from $103 at RBC.

wmt stock price may 9


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