$WMT – Closing May Put Spread Prior to Earnings

by CC May 18, 2016 9:35 am • Commentary• Trade Ideas

On April 29th we initiated a bearish trade in Walmart (WMT) when the stock was $66.66 targeting its q1 earnings report due tomorrow before the bell. We expressed this view by financing a May regular expiration put (that would catch earnings) by selling one that expired last week. Here was the initial trade:

*WMT ($66.66) Buy May 13th weekly / May 20th regular 65 put calendar for 50 cents
  • Sell to open 1 May 13th weekly 65 put at 50 cents
  • Buy to open 1 May 20th regular 65 put for $1

Last week, with the May13th puts due to expire we rolled the short leg of the position and created a dollar cheap vertical put spread, expiring this Friday which would catch the earnings event:


-Bought to close 1 WMT ($65.15) May13th weekly 65 put for .15

-Sold to open 1 May20th 62 put at 0.50

New position – Long the WMT ($65.15) May 65/62 put spread for .15 (currently worth .95)

This morning retail stocks are down across the board (save LOW)  in sympathy with Costco (COST) and Target’s (TGT) weak sales and downbeat outlook on their earnings.

With WMT trading $62.90 as I write, well below our long put strike and the company due to report its earnings tomorrow morning we’re not going to bee too greedy here and risk a bounce back from an oversold condition when they finally report. So we’ll take our profits and move on. It’s ugly in retail wight now and we still remain short the entire sector through an XRT put spread.


Sold to close the WMT ($62.90) May 65/62 put spread at $1.65 for a $1.50 gain